Air NZ to Break Even
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Air NZ to Break Even
Air New Zealand has announced it expects to nearly break even when it announces its full year result to June 30.
The airline, which has seen its share price moved up rapidly since Friday, advised this morning it was expecting to comfortably exceed the previous forecast of a loss of $63.4 million before unusuals and tax.
Changes to the airline's troubled situation included "significant" improvements in tourist traffic, a recovery in passenger numbers generally and cost reduction initiatives which had resulted in a much better trading performance in the last two months.
Air NZ's share price this morning touched a high of 45c, an increase of 18 percent or 7c since Friday. The price is the highest since the events of September 11, which closely followed the collapse of Air NZ's subsidiary Ansett Australia and prompted a Government rescue package.
Andrew Kelleher of ASB Securities said today's statement added to the positive tone the stock was developing.
Yesterday many brokers were stumped for the explanation for the rocketing shares but two possible reasons emerged.
One was increased buying by index-related funds in reaction to a change in Air NZ's market capitalisation tomorrow. That is when the third and final tranche of extra Air NZ shares, issued to the Government as part of the rescue package, are "admitted" into the NZSE-40 and Mid-Cap indices.
The additional shares will boost Air NZ's market capitalisation by 33 percent, from $946 million to $126 billion, prompting an index re-weighting of the stock.
Another possible cause was the release on Friday of a bullish brokerage report by UBS Warburg.
It put the value of Air NZ's stocks at 50c and suggested it could move up to 62c if the airline transforms into a budget carrier.
Air NZ is conducting a review of its short-haul flights and UBS Warburg analyst Timothy Ross suggested that it could make major savings if it was to trim perks such as meals on all flights under four hours long.
His current positive outlook was based on the New Zealand dollar rebound, lower fuel costs, a bounce in air traffic figures, and a restructured cost base.
The airline was slowly outriding its disastrous $1.4 billion loss last year and was likely to post a 2002 profit around $78 million, before carry-over write-offs from Ansett reduced it to a loss of about $252 million, Mr Ross said.
He forecast the airline returning to profitability in 2003 with a net profit of $194.85 million, and a 2004 profit of $239.44 million.
Mr Ross said moving to a budget model was a smart move. Budget airlines in Europe and Australia had left their full-service counterparts for dust.
"You see the load factors of Ryanair and Easyjet heading for the stratosphere as British Airways, Air France, Lufthansa competing on the same hubs struggle to get off the ground.
"How much do you want to pay for an orange juice and a sandwich on a one-hour flight?"
If New Zealand could capture only half the difference in unit operating costs between itself and another industry leader, Southwest Airlines, it could add $65 million annually to its earnings before interest and tax (ebit).
Southwest was likely to be the only profitable carrier in the United States this year, and even half its success could shave $155 million off Air NZ's cost base, Mr Ross said.
The move could also have the advantage of heading off some of Air NZ's strong competition, he said.
It could dissuade budget airline Virgin Blue from crossing the Tasman and force Qantas, which is suspected to be running unprofitably in New Zealand, further into the red.
The airline, which has seen its share price moved up rapidly since Friday, advised this morning it was expecting to comfortably exceed the previous forecast of a loss of $63.4 million before unusuals and tax.
Changes to the airline's troubled situation included "significant" improvements in tourist traffic, a recovery in passenger numbers generally and cost reduction initiatives which had resulted in a much better trading performance in the last two months.
Air NZ's share price this morning touched a high of 45c, an increase of 18 percent or 7c since Friday. The price is the highest since the events of September 11, which closely followed the collapse of Air NZ's subsidiary Ansett Australia and prompted a Government rescue package.
Andrew Kelleher of ASB Securities said today's statement added to the positive tone the stock was developing.
Yesterday many brokers were stumped for the explanation for the rocketing shares but two possible reasons emerged.
One was increased buying by index-related funds in reaction to a change in Air NZ's market capitalisation tomorrow. That is when the third and final tranche of extra Air NZ shares, issued to the Government as part of the rescue package, are "admitted" into the NZSE-40 and Mid-Cap indices.
The additional shares will boost Air NZ's market capitalisation by 33 percent, from $946 million to $126 billion, prompting an index re-weighting of the stock.
Another possible cause was the release on Friday of a bullish brokerage report by UBS Warburg.
It put the value of Air NZ's stocks at 50c and suggested it could move up to 62c if the airline transforms into a budget carrier.
Air NZ is conducting a review of its short-haul flights and UBS Warburg analyst Timothy Ross suggested that it could make major savings if it was to trim perks such as meals on all flights under four hours long.
His current positive outlook was based on the New Zealand dollar rebound, lower fuel costs, a bounce in air traffic figures, and a restructured cost base.
The airline was slowly outriding its disastrous $1.4 billion loss last year and was likely to post a 2002 profit around $78 million, before carry-over write-offs from Ansett reduced it to a loss of about $252 million, Mr Ross said.
He forecast the airline returning to profitability in 2003 with a net profit of $194.85 million, and a 2004 profit of $239.44 million.
Mr Ross said moving to a budget model was a smart move. Budget airlines in Europe and Australia had left their full-service counterparts for dust.
"You see the load factors of Ryanair and Easyjet heading for the stratosphere as British Airways, Air France, Lufthansa competing on the same hubs struggle to get off the ground.
"How much do you want to pay for an orange juice and a sandwich on a one-hour flight?"
If New Zealand could capture only half the difference in unit operating costs between itself and another industry leader, Southwest Airlines, it could add $65 million annually to its earnings before interest and tax (ebit).
Southwest was likely to be the only profitable carrier in the United States this year, and even half its success could shave $155 million off Air NZ's cost base, Mr Ross said.
The move could also have the advantage of heading off some of Air NZ's strong competition, he said.
It could dissuade budget airline Virgin Blue from crossing the Tasman and force Qantas, which is suspected to be running unprofitably in New Zealand, further into the red.
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The tooth fairy still lives on in the land of the long white cloud.
This is the same airline that had 1 Billion in reserves a month or so before the AN collapse. Tell us another one.
This is the same airline that had 1 Billion in reserves a month or so before the AN collapse. Tell us another one.
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IF they are now suddenly doing so well, why on Earth did they kill off Ansett, and ruin the lives of thousands of Australians?
Why didn't they try to sell Ansett off, or fix it up?
Why didn't they try to sell Ansett off, or fix it up?
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TR
They did try to sell it, for $1 but nobody wanted it.
PV
Yeah, nobody has ever explained how GT (an Aussie) kept coming up with that figure, not to sure where he learned maths!
Which is why we all got nervous the other week when they said we have 550 mill in the bank!
At todays share price (49c) the Government has made a tidy 880 mill paper profit on there investment so far, yet the company catch cry is "We have to cut costs more"
The joys of being at the bottom of the food chain!!
They did try to sell it, for $1 but nobody wanted it.
PV
Yeah, nobody has ever explained how GT (an Aussie) kept coming up with that figure, not to sure where he learned maths!
Which is why we all got nervous the other week when they said we have 550 mill in the bank!
At todays share price (49c) the Government has made a tidy 880 mill paper profit on there investment so far, yet the company catch cry is "We have to cut costs more"
The joys of being at the bottom of the food chain!!
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This is bloody good. If it keeps a more people off the street.. fan-friking-tastic.
Hopefully this is the start of a more stable aviation scene for us all. Where once again we can run through the feilds of spring flowers and laugh at times gone by.
Now I just have to find a job. and all will be sweet.
More pills?... Do I have to doctor?
Hopefully this is the start of a more stable aviation scene for us all. Where once again we can run through the feilds of spring flowers and laugh at times gone by.
Now I just have to find a job. and all will be sweet.
More pills?... Do I have to doctor?
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Govt Sitting On Healthy Air NZ Profit
01/05/2002 07:39 AM - IRN
The Government is sitting on a healthy profit following its Air New Zealand bailout, but it is only on paper.
The recent surge in the airline's share price has seen the taxpayer's $885 million stake almost double in value.
Business correspondent Roger Kerr says, while that sounds like a great investment, there is a catch.
He says it is almost impossible for the Government to realise the profit, because there are a limited number of buyers for its 82 percent holding.
Air New Zealand's share price has risen in response to talk that the company might actually break even this financial year.
The airline's shares closed yesterday up six cents at 49 cents, a rise for the day of 14 percent.
01/05/2002 07:39 AM - IRN
The Government is sitting on a healthy profit following its Air New Zealand bailout, but it is only on paper.
The recent surge in the airline's share price has seen the taxpayer's $885 million stake almost double in value.
Business correspondent Roger Kerr says, while that sounds like a great investment, there is a catch.
He says it is almost impossible for the Government to realise the profit, because there are a limited number of buyers for its 82 percent holding.
Air New Zealand's share price has risen in response to talk that the company might actually break even this financial year.
The airline's shares closed yesterday up six cents at 49 cents, a rise for the day of 14 percent.
Evertonian
No chip on my shoulder skol, I had to eat it seeing my airline was cut adrift by a now profitable ANZ!
Oh, and I guess if it was a choice between a profitable ANZ & a squadron of A4's, you'd take ANZ anyday huh?
Oh well, at least now that their share price is up and they are looking good, they'll do the right thing by their former Australian employees & make sure they aren't out of pocket right? ...In our dreams!!!
Oh, and I guess if it was a choice between a profitable ANZ & a squadron of A4's, you'd take ANZ anyday huh?Oh well, at least now that their share price is up and they are looking good, they'll do the right thing by their former Australian employees & make sure they aren't out of pocket right? ...In our dreams!!!
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Ansett is not around, because Air NZ ran it into the ground, poor management actually corrupt management is more like it.
Air NZ use to get their catering for free from Ansett and including ground crews, all expenses paid by Ansett. No cross charges applied, sneaky one.
Air NZ use to get their catering for free from Ansett and including ground crews, all expenses paid by Ansett. No cross charges applied, sneaky one.
As I have said before, the NZ part of the 'group' was always making a profit. The AN side of things soaked up the profit and much more.
If this wasn't the case, how could NZ be making profit before and after AN, but not during??? It simple maths. I'm sorry you guys lost your jobs and I'm thankful I still have one.....
But the truth is, you should be thanking NZ for keeping you employed for a few more years than you should have been.
If this wasn't the case, how could NZ be making profit before and after AN, but not during??? It simple maths. I'm sorry you guys lost your jobs and I'm thankful I still have one.....
But the truth is, you should be thanking NZ for keeping you employed for a few more years than you should have been.
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Air NZ has a very very very long way to go before actual "real" profit is restored and they are out of the woods.
Having a majority share controlled by the NZ govt doesn't exactly inspire confidence in the financial circles around the world that control finances to this company.
Couple this with the fact that the only profitable sector in Air NZ at the moment is NZ Domestic - and this is coming under increased pressure by Qantas who shall shortly increase their capacity by 50% in the coming months doesn't bode well on paper for Air NZ at all.
I recall some months back the board of Air NZ requesting a further $600 million to be injected into the company.
I believe the NZ govt response was that they were not interested in injecting further funds and that Air NZ should find the money from cost-cutting.
I think this says alot and besides - if the NZ govt cant actually sell their shares then the profit (although on paper) is purely academic and about as real as a $3 note.
Having a majority share controlled by the NZ govt doesn't exactly inspire confidence in the financial circles around the world that control finances to this company.
Couple this with the fact that the only profitable sector in Air NZ at the moment is NZ Domestic - and this is coming under increased pressure by Qantas who shall shortly increase their capacity by 50% in the coming months doesn't bode well on paper for Air NZ at all.
I recall some months back the board of Air NZ requesting a further $600 million to be injected into the company.
I believe the NZ govt response was that they were not interested in injecting further funds and that Air NZ should find the money from cost-cutting.
I think this says alot and besides - if the NZ govt cant actually sell their shares then the profit (although on paper) is purely academic and about as real as a $3 note.
Evertonian
skol. Thanks, again, for pointing out the bleeding obvious! However, it does validate my point, so thanks.
If the ANZ board had gone the tri-partate option, we probably wouldn't be having this discussion now. I don't wish ANZ to fail, quite the contrary really. I got to know some chaps in AKL & couldn't have met a finer bunch of guys & girls. I hope their airline survives for their sakes. ANZ's survival also gives us a glimmer of hope for future legal action.....we'll see.
If the ANZ board had gone the tri-partate option, we probably wouldn't be having this discussion now. I don't wish ANZ to fail, quite the contrary really. I got to know some chaps in AKL & couldn't have met a finer bunch of guys & girls. I hope their airline survives for their sakes. ANZ's survival also gives us a glimmer of hope for future legal action.....we'll see.
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Have to agree with Skol, Ansett was Dog Tucker long before AirNZ got hold of it, we were just the ones who were stupid enough to buy it thanks to a con job by Murdoch & Co.
Including your government who reneged on the open skies agreement to allow us to start our own operation so they could jack the price of Qantas up and help News corp offload Ansett and then after we bought it allowed Virgin to start up!!
Including your government who reneged on the open skies agreement to allow us to start our own operation so they could jack the price of Qantas up and help News corp offload Ansett and then after we bought it allowed Virgin to start up!!
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Oh Duhhhh!!
You guys just dont get it, do you . What the AN staffers are cr@pped about is that the NZ govt. (and the AUst.govt. too) actively prevented SQ from staging a rescue/bailout/re-finance of AN. Forget not that AirNZ had held a half share in AN since 1996 and engaged in management practices that well and truely helped to sink us. We will never forget
. What the AN staffers are cr@pped about is that the NZ govt. (and the AUst.govt. too) actively prevented SQ from staging a rescue/bailout/re-finance of AN. Forget not that AirNZ had held a half share in AN since 1996 and engaged in management practices that well and truely helped to sink us. We will never forget