Ummm...how about general market sentiment as a key driver of the SP fall? Nearly all the stocks I follow got hammered this week, not just AIR. IMHO, this is likely to be a significant piece of the puzzle....
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Ummm...how about general market sentiment as a key driver of the SP fall? Nearly all the stocks I follow got hammered this week, not just AIR. IMHO, this is likely to be a significant piece of the puzzle....
Maybe the ones you follow old guy but, NZX fell less than 1% last week, AIR down 11% plus.
Yes, I realise it fell quite hard. My point was that a lot of others did, too, and for no apparent reason.
AIR's significantly harder fall is likely to reflect its (presumably) high beta, but I agree that there are also other factors at play here...
YTD yield is down 1.2% average in $N.Z.(their reporting currency) across the network on RPK's flown which have grown at their fastest rate in the airlines 76 year history.
Did people really expect that yield would be up when they've got something like an extra 15% YTD extra capacity to fill and at a time when jet fuel is the cheapest its been in many many years ?
Did people really expect if QAN got belted down a whole dollar AIR would escape any fallout ?
We all know Jetstar's regional expansion would have some effect on domestic yields...surely this is not rocket science and something that the market already understands !
I know some of us would like to forget the world cup cricket last year, (well certainly the final) but the fact remains that boosted last year's traffic at this time of year and yet load factors despite fast route expansion have held at record high level's...surely a encouraging factor ! I'd suggest the timing of Easter is irrelevant.
This from Stats NZ re CPI for March quarter
International and domestic air fares made downward contributions, down 12 percent and 4.8 percent, respectively. International air fares tend to be affected by seasonal trends, for example, peak seasons and holiday periods.
Given the 15% extra capacity I think they are working wonders although yields will start to fall on the AUK-LAX route in particular at some point overall, Rodger not sure when you are going to LA/Vegas however as at now pricing matching in November picking up flights 1049$ return economy with AIR. (It was September last two weeks ago) Qantas is discounting all over and AIR does follow just more limited seats) If I was you and had the time pick up the Honolulu current deal return with AIR, wide dates available, stop over and then look at Air Alaska or similar first class to the US West Coast. If I recall you want to go to Honolulu as well...
C'mon mickey - you are capable of doing better than that.
As you say a lot of data missing but i think some of 'inferences' you have made aren't that robust - even though a few posters believe (or want to) you.
Thanks Raz, might look into that.
True down 1.2% is not alarming but what mikey was pointing out I think is that the previous month Feb 16 it was down 0.7%.
This extra 0.5% reduction, is calculated as a Yield to date of the financial year. To drop halve a % between 7th and the 8th month of the financial year seems material. It either means March 16 had a very low yield or March 15 very high or as I suspect a combination of those two.
Plenty of holders here seem content to look the other way to the trifecta of rising oil, rising competitions and rising NZD. it would seem to be that air nz can only trade off their premium nz reputation for so long before punters jump ship to cheaper carriers (as many air holders have admitted to doing) are the yield decreases just beginning as the competition has yet to be reflected in the stats of say the nz usa route with AA and United due to commence later on this year.
Part (if not most) of the March month decline can be attributed to the mix of domestic, transtasman and international
Domestic (yield ~27 cents) RPKs were only up 0.3% while transtasman (yield ~12 cents) RPKs were up 1.8% and long haul (yield ~11 cents) RPKs were up a whooping 10.3%
While international travel (esp the long haul stuff) becomes a bigger and bigger part of the AIR business Group Yields will continue to drift down.
Remember yield is $ per RPK - longer the flight lower the yield
But those CASKs are looking bloody impressive - far more important metric than yields
I doubt AA or United will be any threat to AIR. United makes more yield with AIR operating its services with code share arrangements than operating the route itself. American wage costs are significantly higher than AIRs. Australian QF's costs likewise.
AA and United re-entering the South Pacific I think is more about National strategy, maybe trying to block Emirates round the world ambitions.
Whenever capacity is increased yield will always suffer short term. Its all about the profit at the end of the day.
Given the amount of management selling lately its hardly likely that known bad news is around the corner, otherwise insider trading accusations will fly.
On the upturn I'll be back in.
The main reason for the price drop IMO is because of the Quantas drop off combined with the sheeple effect. Air is a much better business than Quantas in so many ways, in fact if it wasn't for the low oil prices they would still be deeply in the red, not to mention they pay no dividends and are not likely to. Expecting a good full year divvy from Air plus a special.
I think too much concern about this yield thing
A slide in the H1 profit announcement "Changes in Profitability' showed revenues were up $247m on pcp
They broke this down into $281m from 'Passenger Capacity' (ie flying more passengers further) off set by $49m less 'yield' (prices) and a +$15m 'Others" (cargo and stuff)
To put that yield impact in context - its $49m on $2,300m or just over 2% (lower prices). Hardly your 50% or 60% off discount sales at Briscoes or Kathmandu is it. Air NZ seem to managing 'pricing' very well.
AIR strategy re growth is to grow markets, fly to new places and all that of stuff. They seem to be succeeding with that revenue growth eh - and it isn't coming from buying market share
Those monthly stats - the key number is RPKs - if they are more than healthy things will be more than OK
That chart in the presentation also showed that fuel cost prices saved them $252m (and they did spend $68m more on fuel because they flew further). CASKs can wait for another day
A bit of positive news to help restore balance
http://www.nzherald.co.nz/business/n...ectid=11631770
I think there's a far far too much volume in this sell off to attribute it to the sheeple, the flock cannot muster anywhere near enough shares (or cognisance) to account for the volume sold. This is big smart money aggressively taking profits, for whatever reasons, selling to the knife catchers, who one might argue are the sheeple.
BAA
With a 7% net dividend yield, I can sit on this for years at absolutely no direct financial outlay. Happy to wait for $4 to hit in the next 2 years or so, providing a 50% cap gain with no intermediary financial strain...
Good charts by baa_baa et al on another thread
I reckon that if they redraw them in a few months time they will be asking what was all the fuss about bzck in April
How you deal with the unexpected is important. The airline industry is in the service industry and how it interacts with its customers is important, so human interest stories are important and have an impact. How should you deal with a passenger, who may have been seen by some other passengers being ill prior to boarding the flight? For a start, other paying passengers would be seated close to this ill passenger. How do you deal with a medical situation, even if it originated elsewhere, on board the plane? How do you deal with a situation requiring assessment and treatment of multiple people on board your plane? How does the company deal with the media?
The $499 one way fares to Buenos Aires that AIR are currently advertising has a yield of 4.8c. That's a 56% discount to their long-haul international yield of 10.8c from the interim report. Sure that's only one fare and it's offset by the limited numbers at that price, and other fares with much higher yield than 10.8c, like business class (where yield is more like 40c)
That was sort of my point though. Until last month their yield management had been superb. But March was a bit of an anomaly. Will be interesting to see what April is like. Is last month's pricing really an anomaly or is it the new normal? Only time will tell. If the April figures show a domestic YTD yield change of -1.7% then it's the new normal. If it's -1% then it was just a one-off anomaly.
I am a little surprised that long haul yield hasn't been hit yet. I'm getting many emails from AIR with news about various sales (today it was Ho Chi Minh, Singapore, Shanghai, Tokyo, HK and BA). And the US tickets are going to get cheaper with new competition.
I think that yield is on seats flown during the month rather than seats sold but I couldn't find a way to confirm that. That means that cheaper seats sold today won't have an effect on yield until a later date. (Can anyone confirm this?)
Remember that the H1 2016 result was a profit before tax of $457m on revenue of $2698m. That's a profit margin of 16.9%. If yield falls by 17% then they are making a loss. I'm not suggesting that will happen any time soon. Just saying that a -8% change in yield in one month is uncomfortably large, no matter how much they grow RPK. (edit: that's not quite right is it. passenger rev was $2308m. So yield would need to drop by 20%, with all other things remaining equal).
Mikey - you're aware that AIR has maintained double digit EBITDA% since 2007, so managed to stay profitable even during the worst economic climate since the 1930s??
I'd call that quite resilient.
No, no, no. That is an error in understanding just what the yield is.
The yield is the amount of profit per seat, so a seat costing the airline $1000 and being sold for $1169 gives a yield of $169 or 16.9%. If the yield drops by 17% then it has dropped to $141 and still has a yield of 14.1%
A drop in yield accompanied by an increase in load factor would equate to an increase in profit,
Now, if the revenue dropped by 17% with a similar drop in costs then AIR would make a loss.
Too much focus on yield and especially the change from Feb stat's to March stat's.
But before we move away from that let's pose the question of why the change for that month. March 2015 N.Z. and Aust hosted the Cricket World cup and loads were unusually high for that month at 87.5%because of that. Naturally with higher loadings and many pax needing to travel on defined dates they were able to extract premium pricing in March 2015.
Now lets zoom out a little and look at the first half, impact on yield compression as it compared to pax revenue growth.
YTD yields for the first half to 31 Dec 2015 were down 1.1%. Pax revenue growth was $281m less yield compression of $49m gives net pax revenue growth of $247m
This on RPK (revenue passanger kilometres) growth of 17%.
Now let's look at CASK.
CASK (Cost per available seat kilometre) was down from 10.87 cpk to 9.44 cpk down 11% on an average oil price of $60 barrel and average exchange rate of 65 cents U.S.
(Oil is materially lower than this now and the exchange rate materially better)
Now lets compare all this to the latest YTD data.
YTD yields were down 1.2%,, (compared to 1.1% in the first half, hardly changed, (in fact probably not changed at all given more growth in long haul v short haul over the summer season) so no great momentous falling off a cliff on a network wide basis at some have incorrectly said, in fact barely changed despite extremely low fuel prices, which are far lower than those prevailing even as recently as the first half of this financial year. RPK growth 14.3%. No doubt substaintial further reduction in CASK this half.
Now lets look at the numbers for last half in terms of operating efficiencies.
Other points worth noting from the most recent analyst presentation at the time of the half year results announcement in Feb 2016 :-
Reduction in CASK delivered $227m in value and efficiencies from growth, fleet simplification e.t.c delivered $106m in value
Conclusion.
While everyone is well and truly entitled to their own opinion I feel based on the big picture the market has misinterpreted the March operating stat's and misinterpreted the seriousness of QAN's very slight rejigging of capacity. Many people seem to be inferring a substaintial fall off in yields and passanger demand and the operating stat's simply don't back that up.
Helpful Suggestion
Some people need to spend more time reading annual reports and analyst presentations and increasing their knowledge of the company before leaping to misguided conclusions.
As human beings ,we are always going to look for a reason,and should.(dreaming about $4 SP may be good for the spirit,but...) so here goes ,to me there are several factors--It all started with the Virgin air problem,that ,to me is when the doubt started to creep in,then a few anomalies in the figures(still stellar?) -Quantas takes a dive(obviously not good as those things inevitably rub off(remember market sentiment does not follow the hard set rules of mathematics and accounting) Then came management selling and the disastrous timing.
They may be just cashing in on some deserved income ,but if the Virgin thing is a bit of a dark cloud,they can sell with no conflict of interest(unless something has been finalized and they know about it) If they dont like where thats going ,there is no reason they cant sell,but in terms of the company and shareholders they could have handled it better.
Sheeple?.......well lets just say that ironically, I think that a poster named Baa Baa has got the best handle on that whole scenario.
PS--United code shares so I can understand that statement. But American Airlines having no affect on the mix with their cheaper prices and nice planes--dont agree with that.
I don't really like EBITDA as a measure. Especially in a capital intensive industry like an airline where D&A were 13% of revenue. To me ignoring D&A implies you're going to run the business into the ground (but maybe I misunderstand the measure). If you're talking about EBIT being double digits then that's a different story but I don't have those figures on me.
With my posts about yield, I'm not trying to say that AIR is badly run (quite the opposite in fact), just that the competitive environment might be getting tougher. As we have seen low oil prices are not necessarily good for airlines becasue they significantly increase competition. Interestingly this time has been different and yield has barely been hit with the drop in oil prices so there is fair bit of space for yields to fall to catch up to oil.
Enough about that from me now. I'm just going to hope that the SP comes back a little bit this week because even with my analysis I didn't sell out last week and am regretting that.
Great post, Roger. I'm certainly not afraid to buy more this week!
The Sheep have been shorn, the rest of us are happy we kept our fleeces, bounce time:cool:
Come on Roger, you know you want to join me at 20% of portfolio allocation:cool:
Must go for a wander along the waterfront again .....and take a photo later today of the ticker showing $2.69 again
And plan on another visit in a week or so tosee it tick over $3
Just as well this lamb isn't thirsty for some milk...went looking for any recent insights and if I was a lamb looking for a feed I'd be bleating like there was no tomorrow :D
On the American airlines thing...this is by no means set in stone..I am looking for AIR to match and the other thing is I tried a variety of dates just flying to LAX in their summer, (renting a Mustang and driving to Las Vegas) and it was generally approx $400 dearer ($1600 to $1700 flying to LAX only) than flying to Las Vegas at $1,222, go figure ?
The other thing these are launch specials by AA to kick off their service which starts in June. Its easy to read too much into initial launch specials in terms of ongoing competition and effect on yields.
AA want to make a sustainable profit on this route just as much as AIR do.
No, I pretty sure I'm not wrong about that. Yield, in airlines terms, is the average revenue per passenger per kilometre, before taking out any costs. Some random internet site tells me that it's a "Measure of average fare paid per mile, per passenger, calculated by dividing passenger revenue by revenue passenger miles (RPMs)"
Costs in relation to airlines are really difficult to calculate in a meaningful way. Arguably, the first seat on a flight from AKL-WLG might cost the airline $5,000. Every seat thereafter costs very close to $0.
Current yields at H1 2016 were 27.5c/km (domestic), 12.2c/km (Tasman and Pacific), 10.8 (International), 13.7 (overall group)
It's measured in cents per kilometre or cents per RPK. For example, taking WLG-AKL at 480 km and 27.5c/km that's $132, or AKL-EZE at 10334 km and 10.8 c/km, that's $1,116. These are very rough estimates at revenue per passenger on certain routes to illustrate.
A drop in yield accompanied by an increase in load factor might equate to an increase in profit.
The domestic lowest cost usually from LAX to Vegas is 60$ one way, so minimum extra cost 120$ to Vegas, lowest cost retail.
If you are flexible on dates then prices will be lower with competition however if seasonal or peak times they will compete less unless they are not meeting load factor benchmarks. I think Qantas is suffering as we went over for the school holidays on $1000 seats. Been along time since i have been on Qantas and never had that price for school holidays since the GFC. They have offered the same for the September holidays. Noted less Aussies in the tourist traps in great LA and the flights were far from full. Instead AIR matched for September so with AIR next time. Qantas service and product on our flights was inferior to AIR. The other items not picked up yet is AA is likely to offer a superior product with the 787 on the route however for $20 full internet access for the trip is a real entertainment factor point of different. AIR in time will need to act upon that aspect.
I see the Chinese are now taking to skiing like ducks to water and they are heading our way this winter(Some of the fields have hired Mandarin speaking hosts in readiness for this influx)coupled with the intro of night flights into Q/town, we should see some excellent monthly stats from Air this coming winter(The only downside is I will have to fight for more field space with the Auckland/Aussie and Chinese invasion) never mind you can't always have your cake and eat it to aye.
Nothing to be concerned about - the country is due for a major tourism infrastructure upgrade for years and with confidence, businesses will take up the challenge and upgrade and increase capacity to meet the demand. This is (and has always been) how tourism works in NZ.
Double checked on AA website this morning. Launch special for their new service now gone since we're now in May and now charging $2,100 return to Las Vegas...same as AIR N.Z.
I think this highlights the fallacy of thinking you can make a judgement call on future yields just based off a competitors initial very limited time launch special.
As I said earlier this morning, you can be sure AA want this to be a sustainable and profitable route for them...no point flying a route that loses you money.
I'm following this weeks price movements like a hawk. Has consistently been weaker in the afternoon last week so that suggest selling emanating from offshore, probably Asia.
Not too worried if they want to whack it down further, $2.30 would be nice :D...massive opportunity for those confident in their own analysis of this fine company :)
From the NBR today:
The New Zealand dollar jumped 3.3% against the Australian dollar and 1.9% against the US dollar last week and is now up nearly 2.3% against the US dollar since the beginning of this year. So it’s unsurprising that the country’s flagship carrier, Air New Zealand, was the week’s biggest decliner after holding that unenviable position the previous week as well. Its shares fell 11.5% last week after dropping 7.3% the previous week.
Craigs Investment Partners’ head of wealth research, Mark Lister, says investors are wondering if it’s the end of the golden weather for the airline. “Air New Zealand’s had a bit of a rough period over the last few weeks,” he says. “The factors that have driven that fall have been rising oil prices, which is obviously a key input cost.” Brent crude oil rose 5.1% last week to $US47.37.
“A stronger currency is an interesting one because, on the one hand, a higher New Zealand dollar means Kiwis can travel more, but it does make it a little bit more expensive for offshore travellers to come here,” Mr Lister says. “The key thing, though, for Air New Zealand, is just nervousness about what we’re seeing in terms of passenger yields and some of those operating statistics that they release on a month-to-month basis,” he says. “People are getting a little bit cautious about whether all of those stars which have been in alignment for Air New Zealand over recent years are just starting to show a few cracks.”
They must have read sharetrader before writing their article.
When you read the daily share report from NBR and the reasons they give for certain share price drops I think to myself c'mon guys you can do better than that. I reckon they have only got about 3 reasons and they do a daily draw from the hat to decide which one of those they will use for the day, so if they did some reading on here for a change that's a good thing.
Virgin Australia struggling...... interesting comment that Singapore Airlines may purchase AIR's stake.
http://www.bloomberg.com/news/articl...s-demand-falls
Yes, you're correct.
I'd hasten to add that it's much more difficult to compare yield between markets (long haul, short haul, or specific sectors flown) or between airlines that it would appear at first glance, due to differences in stage length. That's where alternative measures such as PRASM come into play which incorporates load factor and stage length into the mix.
Good story this one. Hasnt happened to me for years
http://www.stuff.co.nz/travel/news/7...w-almost-empty
How metrics work -
Yield on this fight not affected by the low passenger number
Capacity pretty ****ty
Meanwhile is 100,000 shares big enough to be management?
Looks like 250 level might be support for now..
Yeah I saw that too after watching things closely today. Didn't impact on SP as much as I would have thought though so plenty of buyers around the 2.50 mark got mopped up when it was dropped.
Quite a few other packets dropped of some substance throughout the afternoon as well, I was going to do something additional with AIR today to negate some of the losses last week but a bit hesitant without seeing how it holds for a couple of days.
WD that 100K was an off market sale so had no effect on market, so didn't mop up any buyers:cool:
Wondering if I might get back in, sold close to $3....might buy again for the yield.
Looking again at it now, share price dropped 2c when it happened so coincidental I guess. I was watching it closely as it was dropping from holding around the 2.55 mark most of the morning to 2.50, I was looking at buying more and noticed the sudden change in volume between refreshing data and decided to sit back for a bit more so there was a change in SP at the time.
Well...My ''gutometer'' says the worst is behind us. I could be wrong but with all my posts i guess i should be a participant.
Ive still got a bad feeling about the market in general,and Im not one to be a member of the ''high five club'',but this has been a relatively healthy correction so im in @151.5 (I only wish they would give a discount on air tickets:))
A relatively modest parcel by some of your standards
@151.5. Another edit coming up me thinks.
Anyone notice that VAH announced a third quarter loss today and expectations of a profit for the year which at mid point of $45m implies a loss in Q4 too ?
Can't help wondering who knew late last week that VAH's shocking Q3 result and outlook announcement was coming...surely there's no leaks in the investment banking team at First N.Z assisting AIR with their disposal of the VAH stake ?
Looks to me like insiders were selling last week which paints a dim view of management selling doesn't it ! Maybe the market isn't quite so irrational after all. If VAH can't make money in the current low oil price environment then what's AIR's stake worth and is that 12 month short term loan they made even recoverable ?
Just as well with C.L.'s resignation from the board AIR don't have to consolidate VAH's financial's anymore. Very pleased AIR won't be supporting Ansett Mk2 anymore, opps sorry meant Virgin Australia :D
Just as well with C.L.'s resignation from the board AIR don't have to consolidate VAH's financial's anymore. (Roger)
Convenient eh and good timing ...hmmm
Yes mate...expect truck loads, (should that be plane loads ?), more restructuring costs at VAH driving their full year statutory results deep into the red. Good AIR don't have to consolidate those results but might we see some write down in the value of their stake in VAH in their forthcoming accounts...that being an extraordinary item so doesn't affect underlying profit so again we're all good.
Not to worry though because Mr market is already saying that AIR shares in, and loan advanced to VAH, is close to worthless. Any clean extrication from this mess will no doubt be very warmly welcomed by the market.
Sorry mate
Should have said the small mum and dad retail investors like my neighbour Mike (and a lot of his mates down at the bowling club)
they are in a real tiz at the moment
They been sucked in with the hype that as term deposits aren't worth much they need to invest in high yield stocks.
He got a good divie out of HLG but lost 40 cents a share in the process when he cut his losses. mike and others then piled into AIR and but are really worried at the moment.
Silly buggers - my advice to them is if they don't understand what they doing stick to term deposits.
Anyone notice that VAH announced a third quarter loss today and expectations of a profit for the year which at mid point of $45m implies a loss in Q4 too ? (Roger)
Poor Virgin
Underlying profit - Q1 8m profit Q2 $73m profit Q3 19m loss and Q4 likely 33m loss
Seems to be going the wrong way
The way VAH are retrenching ATR aircraft leases gives an insight into just how bad some parts of Australia have been hit by the mining downturn. The shocking statutory loss this third quarter includes restructuring costs extricating themselves from surplus leases. Reported loss $18.6m statutory loss $58.8m. Just as well the dairy downturn doesn't seem to be affecting AIR at all eh and just as well AIR doesn't have to consolidate its share of that loss anymore given C.L.'s board resignation. FAR more robust picture of domestic demand in N.Z. thank goodness.
AIR's management have absolutely made the right call to review their stake in Virgin. Borgatti must go and by resigning accept the ultimate responsibility for mismanagement of VAH. C.L. is bang on the money with his call for him to fall on his sword IMO.
Oh, 'on market buyers', good you clarified else the off market sellers or buyers might be sheeple eh? Lol. Got to have a sense of humour when your pet company gets gutted in the market for no apparent reason. Well, none I can see anyway, but it has been. Hopefully tomorrow confirms the daily bottom/low is in, then it's happy times again.
What are these 'off market' sales anyway?
Thoughts???
https://www.nzx.com/files/attachments/234648.pdf
Interesting reading
https://www.nzx.com/files/attachments/234648.pdf
• From 30 March 2016, our investment in Virgin Australia will be recognised as an investment in quoted equity instruments
– Fair value movements will be recorded in the profit and loss
New Zealand overseas visitor growth vs Air New Zealand international ASK growth was an interesting chart, AIR has excelled in ASK growth substantially more than the NZ visiter growth. Must be a lot of NZers traveling as well to quantify this.
Couldn't resist and bought another 30k yesterday at $2.52, bringing me to a total of 80k at an average price of $2.60. Keen to see where this gets in the next 2 or 3 years!