Here it is
http://www.stuff.co.nz/business/indu...-vehicle-fleet
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Fantastic...so they have expended million of dollars of shareholders money on a fleet of electric vehicles when the economics of same have never looked worse...and they save in a whole year what amounts to half a tank of fuel into one Dreamliner for one flight. Sorry Mr Luxon but I am most underwhelmed. You should have paid that money out as a better interim dividend.
I suppose the counter argument is AIR are showing sustainability leadership, are perceived to be a good corporate citizen and its very good for public relations, staff morale and the companies image generally. I suppose in the context of a company with turnover looking to grow to $5.5 billion the positive effects outlined in the counter argument have some chance of being of rational economic sense.
Might make for a good discussion point at the next annual meeting.
Yes, that's an underwhelming "big" announcement
Was hoping for something exciting like "we are keeping the 767s around for longer" or "we are announcing AKL- Hobart/Taipei/Manila" or "We are moving to an all ATR fleet for regional operations"
Fantastic responsibility taken though re climate change ; leading for others to follow; full marks.
not really though? All they are doing is giving that perception that they are doing something about climate change.
They save half a tank of dreamliner fuel..this is nothing compared to the the fuel the planes use and emit.
BMW's even??? I'm trying to think about how the sales team needs these vehicles and how they use them --- no idea? Does the sales team go around to corporate clients?
I guess the question is "what is the value of this good PR?" Clearly it's not a good investment for the sake of saving fuel or reducing carbon outputs considering how much they must burn through in a year.
They could just cancel one flight and be twice as effective (fuel savings wise).
They save 65,000 litres a year and the company burns over 1 billion litres of fuel a year...sorry but that doesn't compute on the face of it but I guess every journey starts with a single step.
Corporate image, public perception, staff morale, public relations I can understand but the core numbers and economics themselves don't appear to make sense. I guess Brend we have to trust the guys making the big bucks know more than us other lowly, low visionary bean counters.
Good on you Air NZ for taking the initiative and doing this on your own. That is good corporate leadership.
We now need a government to help encourage more of this shift to the future, instead on sympathy for dinosaurs like Fonterra.
These environmental initiatives driven by their strategic intent of synergistically conceptualizing next-generation technologies.
Good on them
Greens leader James Shaw was impressed with what Luxon said at a breakfast function at Te Papa this morning.
Roger - from what he was saying this morning in a speech this morning at a Sustainability breakfast Chris going to spend heaps more on environmental stuff (second hand feedback from an attendee)
That Sir Jonathan Porritt seems to have a big influence on Chris
IMO the likely outcome of Jetstar's entry is to grow the pie through provision of additional seats at cheaper fares, rather than converting NZ customers en masse.
There has however been some down gauging of regional aircraft (i.e. ATR72 to Q300) on some sectors where JS and NZ depart at close proximities.
Pays not to put people on a pedestal then doesn't it mate...
An over the top lets be environmentally friendly attitude at the shareholders expense, to create a clean image mirage from an industry which is the major polluter to this planet....
The more activity from this industry = extra pollution....this may attract authorities to start rattling the international cage ...maybe the reason for these airline industry guys saying we are trying to be responsible about Carbon emissions so no need to restrict us
It's nothing more than a media con job...Hence the reason why I posted that satirical steampunk picture
Agreed 100% Hoop and yes I picked up on the satire.
Such initiatives give a massive reading on my corporate B.S. meter but the public seem to lap up this kind of environmental public relations image stuff so I guess that's what counts in the bigger scheme of things.
Last I checked the green party had close to 10% of the vote and even ACT are now transforming into some kind of Green party try hard so anything that resonates with this bigger than expected group of consumers is probably good for the company.
I guess I am a naughty capitalist and just wanted a bigger dividend to fuel my 6.4 litre Hemi powered SRT8 Chrysler's rampant thirst...bad dog..in the corner with me.
Full marks to AIR. Their leadership and marketing is world class. This is just another example that is consistent with their sustainability goals that they have said they wish to achieve. They are walking the talk as they always have done under the Fife-Luxon era. The intangible value adds to their brand will be worth substantially more than the directly measurable ROI's of projects like this.
In his speech this mornng Luxon apparently talked about needing to put sustainability at the heart of Air NZ's strategy for the next 75 years.
That shows real commitment eh - stretching goals out that far implies they can ignore emissions for the forseeable future.
Good story though but like most corporates just a story that gives some the warm fuzzies.
How many of you have read this?
Air NZ Sustainability Report 2015
http://www.airnewzealand.co.nz/asset...NEW_MEDRES.pdf
Yeah I can imagine this happening.
Providing our shareholders with an opportunity to reinvest dividend payments in the new Gividend platform, which will support organisations addressing social and environmental challenges
Yes I've skimmed it already and Its certainly an interesting read.
I guess the starting point is when you burn over 1,000,000,000 litres of aviation fuel annually the morally decent thing to do is to be exploring new technology and new efficiencies wherever possible.
I totally get where they are coming from in regard to certain things like:-
1. Modernising their fleet with the most efficient aircraft and technology currently available. In this regard I note they're looking to have one of the youngest fleets in the world by FY19 at a remarkable 6.2 year average age.
The new ATR600's of which they have more than a couple of dozen on order are class leading ultra efficient turboprops. Also as discussed many times AIR were the first airline in the world to order the ultra efficient new 787-9 Dreamliners and will have 9 of them in their fleet by November 2016 which will make them the most prolific wide-bodied type in AIR's fleet. They have three more on order and another six options as well which I expect will be exercised in due course.
2. Retrofitting the latest technology to existing aircraft - Fine examples of this was AIR were first ion the world with the advanced upturned winglet they retrofitted to most of their A320 fleet saving approx. 4% fuel burn and they're kitting out their ATR fleet with the very latest advanced GPS navigational systems that will allow them to follow very tightly controlled and accurate flight paths and use smart and efficient landing approaches, (another $25m investment).
3. Smart technology and apps such as boarding passes on your cell phone, eliminating wastage.
4. Simplifying systems and procedures. Its seems clear management are on a broadly based efficiency drive throughout the business to enhance processes, systems efficiencies and the way they generally do things so the airline runs like a well oiled and efficient Swiss watch.
Its good they're showing leadership and responsibility as much as possible and trying to be as kind to the environment as possible too and its fair to say that when you combine for example the circa 24% extra seat mile efficiency of a Dreamliner with smart flight path's smart approaches e.t.c. it does make a meaningful difference.
Some of their strategies don't resonate with me and are either above my pay grade, too high brow or I ponder whether they really have a satisfactory return on capital invested and yesterday's electric car fleet acquisition is a good example of that but if they don't show sustainability leadership who will ?
The reality though is until mankind finds some clean way to produce the circa 150,000 horsepower required to power an efficient new aircraft like the Dreamliner airlines will be huge polluters there's no getting away from that ugly fact but at least they're doing what they can with all the currently available technology and I certainly respect them for that.
At a personal level, I agree with JT that we all need to take some account of our own environmental footprint. As for us we were early adopters of a hybrid car for my wife's general run-around vehicle and have owned a hybrid for 10 years now and we have lots of trees on our 1 acre bush clad section so I don't feel too guilty enjoying that Hemi powered V8 of mine from time to time :)
Agreed 100% dobby41. The reality is being seen to be as green as possible is good for business because a lot of people care about the environment.
777 - Yes but they list them as separate aircraft types. Their 7 777-300's for example carry 332 pax v only 312 pax for the earlier 200's of which they have 8 and are I understand, somewhat less efficient on the seat mile basis.
http://www.nzherald.co.nz/business/n...ectid=11607138
Jetstar finally concede to alter their unfair online trading practices only after the overt threat of litigation.
Yep,some of those online booking systems are enough to drive you bonkers (really devious) Air asia was the worst--(not only with insurance (pre ticked) but seats as well . Both you had to undo what they did by default(after you figured it out,.. which was no easy task)
Now back to AIR--change of ticket--we've already figured out that ''Compassionate grounds''cuts no ice-----now its just trying to figure out how ''change of date +price increase'' works.
Fees--thats easy--Its what they say---increase in price--They seemed to have picked that out of thin air---Its not the price of the ticket when bought(it was on sale)--It doesnt appear to be even the ''normal'' price when bought----Its not the advertised price now(setting aside any sale)---They seemed to have chosen a price higher than any of those--Guess that shows they will do what they can to exploit that sort of situation(like they tried before with the same thing as Jet star,before changing) ..Sorry..No more moral high ground for this chap in the case of this outfit.
http://exploreyourbackyard.co.nz/?ut...rDomesticDOC16
Nice new marketing initiative, explore your own backyard in association with the Department of Conservation...opps is that AIR management appearing to be Greenies again :)
I would hazard a guess that for the majority of people booking flights how environmental 'friendly' an airline is is way down on the list of what's important when choosing who to fly with.
And if it is important to some I'm sure those people would see this 'clever marketing' for what really is - a cynical way to be seen as being green
Does AIR use free range chicken / pork / bacon on their menus?
Looks out for those divvies coming your way tomorrow people, I bet they are one of first few to pay if not the only one :t_up:
http://www.newzealand.com/int/
100% pure New Zealand is the message from Tourism New Zealand. I see there is an AIR NZ "find and book flights" on the front page.
Environmentally friendly Air New Zealand is the most logical choice for the tourists coming to NZ to enjoy our pristine environment.
So yes it is a marketing tactic from Air NZ with bio fuels and electric ground vehicles but it ties Air into Tourism NZ's very large international marketing campaign.
$moke and mirrors? I imagine Air NZ want them to care a little but not too much, so that they still jump on a plane to whizz around the World and buy produce that needs to be air freighted into the country.
https://en.wikipedia.org/wiki/Enviro...ct_of_aviation
Today's thought ?
What to do with "the nice juicy dividend" ??
Back in AIR @ pre div price ??...perhaps not, then where ?
It was nice to see a reasonable increase in the SP yesterday along with the dividend. To be honest I was a little underwhelmed with the size of the dividend 10 cps but understand that they're making a huge investment in efficient new aircraft over the next few years. From memory on the whole green thing, C.L. told the 2014 annual meeting they're setting the airline to be profitable if and when $120 oil comes along again, which I suppose is inevitable at some stage.
In the short run now that all the good news on the recent half year result is out along with full year guiance it wouldn't surprise me to see some consolidation around the current level however what continues to impress is how resilient the airline's performance is, seen even in February's operating stat's at a time when some thought we were on the verge of another GFC or at least a second leg to the first one.
I remain of the view that AIR is highly likely to pay a special along with its final this year. AIR is in good shape, has retained around 67% of its first half earnings so its balance sheet is stronger by 20 cps in cash than six months ago and the recent small pop upwards in the currency will make the capex this year a little less expensive.
Blockhead - Market looks close to fully priced with the odd exception. This and scales look like good opportunities to me or maybe better still just reinvest back into AIR in terms of enjoying some travel :)
Hi Roger, analysing can be done with many different approaches, looking at the P/E as you have done and AIR indeed looks a bargain. I decided to look at the ASB web side and took an 9 year average of the free cash flow.
9 year average of FCF = $24mil. If one takes the present market cap of app $3.2bil then by my calculation the 9 year P/FCF equals app 132. That doesn't look so appealing. However future FCF is hopefully a lot better. What are you expectations of the FCF for the next few years?
Cheers,
Hi Forest,
AIR are expanding their fleet at the fastest rate in their 75 year history and by FY 19 they are forecasting their average fleet age to come down to 6.2 years, was nearly 8 years in 2014 IIRC so quite a dramatic modernisation programme is effected because of the rapid fleet expansion with new aircraft.
I am sure you can imagine this programme is capital intensive and consensus analyst forecast off 4 traders for capex is as follows last year and for the next 3 years, comparative figures for Qantas, also provided
FY15 $1.18b $1 share (QAN $1.35b 65 cps)
FY16 $901m 80 cps (QAN $1.38b 67 cps)
FY17 $856m 76 cps (QAN $1.36b 66cps)
FY18 $962m 86 cps (QAN $1.45b 70cps)
If we take off circa $450m per annum in depreciation you can see the net cost of a fairly dramatic investment in fleet expansion and modernisation.
FCF IMHO is better suited to companies that aren't on such an extensive fleet expansion and modernisation programme but for what its worth management did comment in the conference call in February 2016 that there's tremendous potential for free cash flow later this decade. As you can see from QAN comparative figures, they're neither expanding or modernising their fleet at anything like the rate AIR are and indeed this year are forecasting RPK growth of circa 5%, whereas AIR's forecast is 12% this year and 8-10% next year.
The short answer is AIR are reinvesting back for growth and QAN is rebuilding its somewhat stretched balance sheet and is therefore still using old fuel hungry planes like the 747-400 which are okay now but will really hurt them when fuel goes back up.
I tend to focus on operating cash flow per share, (about $1 per share) and let management who are far smarter than I decide on capex and run the airline how they see fit.
Thanks for your view on this, I think cap exp might be a little higher then normal (a few hundred $mil) in the coming years, and it is likely money well spend. But for AIR it is also likely that cap exp (maybe $500mil plus) is a yearly occurrence and should be taken into any valuation.
No worries Forest. Another way to look at this is and give it more clarity is to look at the depreciation rate itself.
If AIR weren't expanding or modernising their fleet then they would need to replace it at the same rate as its been depreciated. i.e. depreciation is the amortisation of the fleet over its useful life, generally 18 years per aircraft. In this instance AIR would therefore have to spend about 450m on capex each year to match its depreciation expense.
Remember that consensus analyst forecast this year is circa $850m before tax, (I am around $950m) but this is after accounting for $450m depreciation...i.e. underlying profit before tax and depreciation is $1,400m in my estimate.
Depending upon what management want to do with the airline, (if they just want to leave the airline the same size and allow average fleet age to gradually return from 6.2 years to half life, 9 years) it could be a truly massive cash flow generator from FY19 onward. Maybe the Govt might like that ?
12.5% drop in share price for Virgin, right on 5 pm local time Friday 18 March. Over 5 million shares traded, much higher than usual. No apparent reason for this drop, and nothing in the Media or on Hotcopper. Seems strange given the stunning positive results released just a week ago. The only negative in the results was the lack of guidance for the coming year. But 12.5% drop in one day???
It will be interesting to see if this has any effect on the AirNZ share price on Monday, given they own 26% of VAH.
Probably index rebalancing mate and probably recover fairly quickly.
Update on the wifes AK-Vancouver AIR flight---She got 2 seats so was lucky but froze the whole way---Is that bad customer service or just a bad plane?-(maybe they were warm in another area)--The same thing happened when we flew that route 3 years ago----Thats a pretty basic thing to get wrong---Has any one else had that problem?
[QUOTE=skid;612403]Update on the wifes AK-Vancouver AIR flight---She got 2 seats so was lucky but froze the whole way---Is that bad customer service or just a bad plane?-(maybe they were warm in another area)--The same thing happened when we flew that route 3 years ago----Thats a pretty basic thing to get wrong---Has any one else had that problem?[/
The temp is controlled by the Cabin staff. This is often rationalized by other passengers complaining its too hot. From my experiences "the squeaky door is the one that gets the oil"
My wife often complains its too hot or too cold and I'm usually feeling the exact opposite in exactly the same environment...just saying.
Major Shareholders Provide Loan Facility to Virgin Australi
10:47am, 21 Mar 2016 | GENERAL
Air New Zealand advises that it has agreed to support Virgin Australia Holdings Limited (Virgin Australia or the Company) by providing a new unsecured term loan facility.
Air New Zealand (NZX: AIR), Etihad Airways, Singapore Airlines (SGX: SIA) and Virgin Group will each separately provide funding via of a new loan facility to Virgin Australia. This is an initial step in strengthening Virgin Australia’s liquidity while the Company commences a review of its capital structure. The review will include an assessment of the appropriate mix of debt and equity capital and operational initiatives to enhance Virgin Australia’s cash flow and profitability.
The facilities are for an aggregate amount of AUD425 million with pro rata participation from each shareholder based on their relevant interest. The facilities are for a term of 12 months and are based on arm’s length commercial terms.
Air New Zealand’s portion of the loan facility to be funded to Virgin Australia is AUD131.2 million (approximately NZD146.5 million).
Virgin Investments Limited will provide the loan facility. Virgin Group’s shareholding in the Virgin Australia Group is held by Corvina Holdings Limited.
Ends
First impressions. I'm not too pleased with this. IF VAH isn't already making good money when the fuel costs are so low why not ? The fact that they say its an initial step...suggests further investment is required :eek2:
On the other hand its good that they're looking at operational initiatives to enhance cash flow and profitability and I suspect that review will be very thorough. Maybe VAH's CEO needs to step down if he can't cut the mustard and regularly needs external shareholders assistance ? Note AIR increased their investment in VAH in 2014. How much more will be required and maybe this is what's behind Friday's SP plunge ? Return on AIR's investment to date has been very poor and memory of Ansett fiasco lingers and I suspect in some people's minds remains the default setting until proven otherwise. Sometimes in a quieter moment I wonder about this whole VAH investment strategy... Sorry folks...more questions than answers from me on the VAH matter. I suppose we can take some comfort from Chris Luxon being on the board. P.S. VAH is also well served with very good intellectual horsepower from key representatives of its other airline shareholders.
Hmmm....Announcement released at 10.47am Monday NZT
MR Market sees nothing sinister in this announcement as AIR is still up 2c this morning.....
Air New Zealand (NZX: AIR), Etihad Airways, Singapore Airlines (SGX: SIA) and Virgin Group will each separately provide funding via of a new loan facility to Virgin Australia. This is an initial step in strengthening Virgin Australia's liquidity while the Company commences a review of its capital structure. The review will include an assessment of the appropriate mix of debt and equity capital and operational initiatives to enhance Virgin Australia's cash flow and profitability.
No announcement yet on the ASX so was VAH Friday's 12.5% drop a result of insider trading..
And now we are seeing the SP come under some pressure from this announcement...what a surprise...(NOT) Disc I let some freight off at $2.86..will look to reload later.
VAH set to open at 38.5 cps, up 10% so at least the Australian market sees this as a positive for VAH. Although this is a loan not further capital at this stage, the requirement for possible further capital is clearly hinted at in the news release so I'd like to see the operational review of VAH be radical and far reaching. Really their level of profitability when oil is so low is woefully inadequate for the amount of shareholders funds already involved. I am pretty sure the other shareholders in VAH would agree with that viewpoint.
Same here - sold 40% of my holdings @ $2.84 also with the intention to reload later.
Looks like VAH will open back up at 38.5c.
if you had been on the fight I was on i think you would not say that--It was literally like sitting outside on an unsettled winter day----I think it is far more likely that they couldnt get a consistent temperature throughout the plane----just as a sidebar ,Ive never had that problem on any other flights on different carriers.--Is the AK-Vancouver route the last of the older planes?(My wife is not the kind who shy's away from diplomatically trying to sort those kind of things out,but I dont know all the details)
Ive had some pretty uncomfortable waits at some airports though.
funny enough ,my worst experience was on a bus in the tropics(Cambodia)..thought I was going to get Pneumonia!
The oldest of 777-200s are only just over 10 years old. Hardly old in aircraft terms.
Skid - Maybe bleating like a lamb lost from its mother would have seen her shifted to another part of the aircraft...maybe even upgraded ? Agree with 777 on the age thing.
Of more interest, tourism continues to grow at 10% in the year to the end of February 2016. http://www.sharechat.co.nz/article/8...ruary-yearhtml
I suppose all those new migrants which are additional to the tourism growth want to travel around their new country too and have their visitors come and stay in the future. They might even fly VAH part of the way...looks like it could do with the help.
The only odd bit from those travel stats today was -'overseas travel by New Zealanders fell sharply in February' (Westpac)
http://www.stuff.co.nz/business/indu...2-million-loan
There is our dividend
Meanwhile, the market seems to have shrugged off the quick sell down and is now at intra day high. Nice bullish sign.
That's it...there's our special divvy gone right down the **** hole that is AIR investing in Australian airlines...not happy, electric cars that don't give a decent return on capital, now our special divvy gone for a burton...what's next, AIR investing $50m in new uniforms that trap staff carbon emissions ? I'm very annoyed, sold 2/3 rd's of my holding now and yet the SP goes up...go figure ????????
Don't say that Warren Buffett didn't warn the world about investing in airlines! Trading is a different matter, of course.
;)
In case people think I am kidding about there goes our special divvy, I'm not. Fact is AIR's gearing was close to the top of their 55% self imposed limit as at 31 December 2015, within about 1.5% of that if I remember correctly and with big ongoing capex this calendar year this investment in Virgin really has dramatically diminished our chances of a special divvy this year. Not impossible but now looking unlikely. Have to admit with all my work on this company I never saw this coming. Love these sort of surprises :eek2:
Agreed. Stingy final last year too. Really if Virgin can't stand on its own two feet in the current low oil price environment then...
Only consolation I take from this is that all the other well respected airlines that are shareholders in VAH are also contributing, so maybe seeing as they all see merit in it, its not quite the Ansett black hole we think it could be ?
I'm still very grumpy though...hate seeing my special dividend sailing off to some foreign shores, down some deep dark black hole it might never come out of again :(:(:(
And yet the SP tracks higher on this news...bizarre ????????
I got out this morning at a lower price than now but I don't really care, I'm guessing some punters think this loan is going to help generate bigger profits for Virgin hence the bizarre increase in the SP this arvo but I wouldn't hold my breath on that one. Besides all that other extra green stuff of late don't impress me much anyways.
This bit, (emphasis added), should concern any shareholder who remembers the Ansett fiasco. I don't blame you guys...recent announcements and dividend level's have really disappointed me.Quote:
"This is an initial step in strengthening Virgin Australia's liquidity"
Why are they having issues with liquidity ?...last time I checked people paid for their flights before they flew and the price of fuel was close to ten year lows.
Hi Mickey. An unkind person (realist ?) might put mouse on the end of your user name and say that sums up recent announcements by AIR pretty well.
At this rate no final dividend - just joking
You need to trust Tony and Chris - they have things under control
It's all part of collaboratively enhancing go forward scenarios to make AIR and Virgin stronger so they can make even more money
Right.... enough venting now, (right or wrong you folks will never die wondering what big Rodge thinks :lol: :lol:)...I shall go and eat another juciy scales apple and count my many blessings.
You guys have all bailed (hopefully with your parachutes on) because of this?
Because you might get less divvy this year and next year than you expected?
What a fickle bunch you are!
Looking ahead, I do not see what has really changed.
Best Wishes
Paper Tiger
When masses sell often good time to buy
That $3 barrier has to be eventually broken through for an extended period.
Maybe this is the catalyst
Bugger - won't get in at $2.69 now
I still hold some but the truth is $145m pushes them right to the edge of their maximum self imposed leverage position (55%) and dramatically reduces the chances of a special dividend so fundamentally changes the forecast dividend yield and they are throwing trucks loads of our cash down green holes and black holes with little immediate prospect of any commercial payback but you can't see that anything has changed PT ? I can recommend a very good optometrist just up the road here...might even test tiger's eye's for all I know :)
The distinct prospect of further equity required to be injected is grounds for concern too. Any wonder prudent risk averse investors have been reviewing their positions quickly...
Opps so sorry, does that amount to further venting :blush:
How much have AIR invested in Virgin now
Just a bit lazy at the moment.
I agree with what Winner is saying although might need some caution. Someone was buying today despite all the commotion at midday and share traders running for the hills.
No mate it hasn't but is coming right and I think AIR's share of half year profit to 31 December 2015 was about $15m.
Quizzing C.L. after the annual meeting in 2014 he thought it wouldn't be profitable until FY17 so as its turned out they're a year ahead of that, albeit helped in no small way by the very low fuel price.
I might have over-reacted a bit today but talk about being blindsided and references to this being an initial assistance package to assist with liquidity isn't a good look. Maybe Tiger airways bleeding a bit and a bit lame... ? Maybe we should send Paper Tiger over there to give their overheads a really good mauling and teach the executives how to survive and thrive on skim milk :)
I would have thought VAH would have been strong enough and have enough momentum to fly under its own power by this stage ? Ansett Mk2 anyone ?
This particular route is one that I fly often. I haven't personally experience the issue you've outlined above, but sometimes those around me (both on this route and other non-NZ serviced routes) have complained of being too hot or too cold, sometimes at the same time! My advice would be to politely ask the cabin crew if something can be done, or ask to be seated elsewhere even if for a little while to see if a cooler area can be found.
Everyone feels heat differently, everyone is dressed differently and everyone is seated slightly differently so despite the air being a consistent temperature when it leaves the vents, the experience can vary wildly.
VAH are major contributors' to AIR's Trans Tasman operation, 3 to4 wide bodies every day from SYD to AKL and they are running at 90% full. I suggest the latest financial injection is to rattle QF's cage.
Going from memory i think AIR paid 48 cents for the last lot they bought.
Tongue in cheek, I know..... :) Ansett showed far less long-term viability than VAH did at this point in its lifecycle.
Given the fundamentals of AIR hasn't changed, I'm not sell any my holding based on this. Would pay to keep a keen eye on the VAH financials though.
Virgin - Another few hundred million of debt on top of the $3.1 billion they already have isn't a big thing
Well it is if the brand is not perceived well in its market place and it still struggling with this economic tail wind...now I'm wondering....
AIR share price has not performed well in the past twelve with its best results to date..take away the dividend premium potential and it become a trade share for me...simple.
Yes I have come to the same conclusion. Winner the market is rampant with greed currently, a few selling out of Air is neither here nor there, perhaps it's time to sell down in general and wait for the fear to return which it will as sure as winter is coming. PS-I love winter and all its trimmings:cool:
Nice to see you back couta. I can say I miss your posts
Had a quick look at Virgin financials.
Last 1/2 year was pretty abysmal seeing airlines are meant to be creaming it. Operating cash flow was only $10m and after capex etc negative free cash flow of $250m odd.
Debt over $3.1 billion with equity less than $1 billion - highly leveraged. See why they need a few hundred million extra cash in light of current cash burn.
AIR will never see the amount lentagain. I suspect that it will end up as equity along with a another decent injection of capital before years end.
This 'connection' with Virgin must be vitally important to AIR - yes?
Thanks for looking at VAH's balance sheet, saved me a little job this morning and more than happy to rely on your figures. I suspect the amount lent will get converted to equity towards the end of the review. I think this extra equity is enough to put VAH on a reasonable footing. If VAH with further profit this half can get to a debt : equity ratio of 2:1 that's not too bad a not far off QAN's level of capitalisation either.
I need to apologise to you good folks for a mistake I made yesterday, (realising that the odd person on here relies on me to crunch the numbers properly). Yes the current level of gearing was about 53.5% as at 31 December 2015 and this is fairly low by international standards for this capital intensive business which is why AIR is one of the few airlines in the world to have an investment grade credit rating.
Yes they have a self imposed ceiling of 55% but I think this is a glass ceiling and is moveable to some extent.
Yesterday I made the mistake that this short term loan to VAH would change the gearing ratio and in the cold light of a new day I realise this is a mistake and it won't. It will simply change one asset class, cash for another, short term advance to VAH so the gearing ratio won't change. Apologies to those that relied on my statement on gearing yesterday and I hope this wasn't a major factor in your decision to sell.
This is speculative on my part but I think its likely that this short term loan to VAH will get converted to an equity investment due course, hopefully after a very thorough review of VAH's operation but again this will not change AIR's gearing as again this simply transfers the money into another asset class, investment in associate company as opposed to loan to associate company.
Perhaps I should unpack the whole finance lease and operating leases issue for those that don't know and how that's translated into the balance sheet footings so that people can be more informed on how this works. All future lease liabilities both operating and finance leases, primarily in overseas currency, are converted into debt as at the exchange rate prevailing as at balance date. What this means is that if our currency is lower like it was as at 31 December 2015, approx. 65 cents U.S. the $N.Z amount of those liabilities is higher and thus their gearing at balance date reflects that. That's to the best of my knowledge how I understand it anyway but please DYOR.
If we see the $Kiwi head up toward 70 cents U.S. as we head towards 30 June 2016 and taking into account profit for the current half we could see gearing under 50% and room for a modest special dividend.
Its too early to say. Gordon Gekko in Wall Street famously said, "Don't get emotional about stocks" (I must keep that in mind).
Overall I have a neutral view on AIR at this stage. There are strong headwinds coming in the form of significant extra competition and the pricing of some of the discount carriers such as AIR Asia X is fairly disruptive but AIR has a good brand and a good business model so should do well over the long haul and is enjoying strong tailwinds from robust tourism growth.
Those selling yesterday at $2.88 ex divvy got close to effectively $3 on a cum divvy basis given they just got that 10 cent dividend so not too bad a result and given all the circumstances including the VAH matter i'm not displeased I regularised the size of my investment in AIR from a heavily overweight position.
I might look to add a bit more freight if there's another correction down towards $2.75 at some stage, depending how their monthly operating stat's pan out over the next few months.
There was a Dreamliner parked up at Wellington the other night
It had United Arab Emirates written down the side but wasn't in the normal Emirates Airlines livery
Another airline thinking of coming to NZ? Or just some government delegation from UAE.
I look at it in a rather simplistic way, if Air NZ was to pay a special divi of $150M, then this would ex divi have a $0.135 impact on share price.
The fact is, that this $150M has not gone up in smoke, it is an investment and I trust that the management team at Air NZ have thought it through. So the impact on share price right now should be nil unless some punters were holding out for a super dividend later in the year.
I'm not sure how long I will hold this for but yesterday's announcement is not really sending any alarm bells.