I went back to the 85 cent mark as the start
Using my Commodore 64
Printable View
Bought early this morning at 2.36. Still feeling a bit downward pressure. It may test the support tomorrow. Hopefully US and EU might have some good news/data
From my take, about 10% was wiped off the market capitalisation, on a announcement that Jetstar going to fly more routes domestically with limited real details (plus the background of higher oil and the lower dollar).
The equivalent of about $290m.
Seems silly. :confused:
http://www.scoop.co.nz/stories/BU150...nal-routes.htm
Here we go, looks like Air Nz ready to take on the challenge, game on!!!
Jetstar say they will take on 4 regional destinations. My guess is Hamilton, Palmerston North, Nelson and Napier; these are the four busiest regional airports. As well, there may possibly be more flights Queenstown to Christchurch and Wellington depending on capacity. Jetstar will be using Q300's, which are not as efficient as the ATR's that AirNZ uses for many of the flights from these 4 centres. Frequency will be far less than AirNZ and there will not be the continuity onto many of the International destinations from Auckland that AirNZ fly to. So on that basis it is hard to see Jetstar making any profit if they try to match AirNZ on price.
My guess is that these four regional routes (will they only be to and from Auckland?) contribute less than half of AirNZ's profit on all regional routes, which in turn is far less than the domestic main trunk routes. Overall it's only going to make a small dent in numbers changing from AirNZ to Jetstar.
The profitable passengers in all these centres come from the business community, frequent flyers and those continuing on to overseas on AirNZ. It's hard to see many of them giving up their FF cards and lounge access and frequency for Jetstar, which won't offer these perks and indeed might only be flying for a year or two.
Qantas have only just emerged from a bruising price war with Virgin in Australia, which did not benefit either airline. Virgin survived in part from the huge support provided by AirNZ, Etihad and Singapore Airlines. A big market for all those four airlines so worth fighting for. What is Qantas got to gain from flying a handful of 'bargain basement' passengers from a few tiny towns in NZ?
Some years ago Qantas pulled the pin on their codeshare with Origin Pacific, which promptly went out of business. Qantas also abandoned it's Christchurch - Rotorua flights years ago as they were unprofitable. How could they succeed now, given past failures?
Setup costs for Jetstar will be substantial and given the price war that is bound to occur it's going to take years for Jetstar to recover setup costs, let alone make any profit.
Check the hyperbole in 2004 when Pacific Blue and Jetstar announced their respective plans for New Zealand http://www.theage.com.au/articles/20...732539983.html
So, am I worried about Jetstar introducing a few clapped out Q300's into four regional airports to carry a handful of budget passengers at $49 a seat? Not on your life. AirNZ might lose $10 million of profit in 2015/16 with price matching but that will only shave about 5% off Net Profit. My bet is that Jetstar Regional will be gone within 3 years, having cost Australian Shareholders a heap of money.
Yes, I did increase my AirNZ stake by 10% with this latest fall!
LOL really ? According to Craigs AIR investors have enjoyed compound annual returns of 12% per annum for the last decade. Very few other stocks can match that with notable exceptions of other quality companies like FPH and RYM.
Pretty simple really, the airline business is volatile and has arguably more business risk that some other sectors. AIR trades on a forward PE of 6 that's one third of the market average !! of circa 18 times FY16 earnings.
Its up to investors to decide if a well managed business like AIR should be trading at such an incredibly deep discount to the market average and its international peers.
Some see risk, other see a brilliant opportunity to capitalise on negative sentiment and such negative sentiment may have an almost immaterial effect on real earnings going forward.
Chris Luxon and his team will give Jethole hell and burn Jetstar's profit and loss statement deep into the red in the process. AIR is in a VASTLY stronger financial position than Qantas.
Good post Robomo...exactly what my thoughts were too, don't think its going to hurt their earnings that badly as the market reacted y'day.
Probably Qantas strategy is to use some old surplus planes as a disruptive weapon to hurt one of AIRs uncontested profit engines.
Low cost operation but they know it won't be a gold mine (may not even be profitable) but might distract AIR elsewhere where they could benefit
Just a disruptive tactic in a bigger game, the games big boys play to stroke their egos.
Be all over in a few years time.
You forgot to mention one thing, Jetstar planes probably won't be on time (that is if they turn up at all!), making it even better for air nz...