Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 2017 Earnings Presentation
28 slides from Air New Zealand's earnings presentation, Feb 23, 2017
Slide 1: Interim Results 2017
For personal use only INTERIM RESULTS 2017
Slide 2: Forward looking statements
Forward looking statements INTERIM RESULTS 2017 For personal use only This presentation contains forward-looking statements. Forward-looking statements often include words such as “anticipate", "expect", "intend", "plan", "believe“ , “continue” or similar words in connection with discussions of futu
Slide 3: Christopher Luxon, Chief Executive Officer
INTERIM RESULTS 2017 For personal use only Christopher Luxon Chief Executive Officer
Slide 4: The second best interim result in our history during a period of intense competition
The second best interim result in our history during a period of intense competition INTERIM RESULTS 2017 For personal use only • Operating revenue $2.6 billion • Earnings before taxation $349 million* • Net profit after taxation $256 million • Operating cash flow $376 million Earnings Earnings Net
Slide 5: Key drivers of the result
Key drivers of the result INTERIM RESULTS 2017 For personal use only • Passenger revenue excluding FX down 3.1%; reported down 4.0% – Demand slightly lagging capacity growth – RPKs and ASKs up 5.5% and Revenue 7.1%, respectively – RASK excluding FX down 9.3%; reported down 10.4% • Cargo revenue excl
Slide 6: Revenue challenged by industry capacity, but encouraging signs emerging
Revenue challenged by industry capacity, but encouraging signs emerging INTERIM RESULTS 2017 For personal use only Year-on-year (YoY) Sector Commentary 2H 2017 RASK outlook • Fluctuations month to month based upon timing of events (Chinese New Year and Easter) Domestic Better than YoY 1H RASK • Forw
Slide 7: Tailwinds and headwinds looking to the second half of 2017
Tailwinds and headwinds looking to the second half of 2017 INTERIM RESULTS 2017 For personal use only Tailwinds Headwinds • Continued strong growth in inbound and • First full year of new international outbound tourism competition in North America and Asia • Low season capacity management from sever
Slide 8: Rob McDonald, Chief Financial Officer
INTERIM RESULTS 2017 For personal use only Rob McDonald Chief Financial Officer
Slide 9: Changes in profitability
Changes in profitability INTERIM RESULTS 2017 For personal use only 9
Slide 10: CASK improvement
CASK* improvement INTERIM RESULTS 2017 For personal use only • CASK excluding FX improved 8.5%; reported improved 6.7% • $113 million of efficiencies from growth, fleet simplification, productivity and other cost saving initiatives more than offset inflation • Fuel cost decreased 18% – Includes the
Slide 11: Domestic
Domestic INTERIM RESULTS 2017 For personal use only • Completed roll-out of re-designed network schedule, resulting in: – Less complexity – Greater choice for business travel – Improved intra-regional and regional New Zealand-to-international connections Dec 2016 Dec 2015 Movement* Passengers carrie
Slide 12: Tasman & Pacific Islands
Tasman & Pacific Islands INTERIM RESULTS 2017 For personal use only • Sector impacted from industry capacity growth directly on the Tasman as well as increase in direct services to New Zealand from Chinese and Gulf carriers • Strong demand for Pacific Island routes from New Zealand outbound travelle
Slide 13: International
International INTERIM RESULTS 2017 For personal use only • Anniversary of Houston and Buenos Aires; strong performance for both routes • Seasonal routes of Ho Chi Minh City (June – October) and Osaka (November – April) • Announced commencement into Haneda airport in Tokyo beginning in July 2017 Dec
Slide 14: Cargo
Cargo INTERIM RESULTS 2017 For personal use only • Revenue decline driven by – Competition from new carriers in U.S. and Volume Asia up 8.5% – Los Angeles International airport runway issues • Partially offset by strong volume growth related Revenue to new Houston and Buenos Aires routes and down la
Slide 15: Aircraft update
Aircraft update INTERIM RESULTS 2017 For personal use only • Expected investment of ~$1.6 billion in aircraft and associated assets over the next 4.5 years • Assumes NZD/USD = 0.725 • Includes progress payments on aircraft • Entered into operating lease agreement with Air Lease Corporation for one B
Slide 16: Operating cash flow and liquidity remain robust
Operating cash flow and liquidity remain robust INTERIM RESULTS 2017 For personal use only • Operating cash flow $376 million – One-time outflow of $58 million related to a restructured engine maintenance agreement • Net cash on hand of $1.3 billion includes: – $182 million inflow from the sale of r
Slide 17: Continued capital discipline underpinning balance sheet strength
Continued capital discipline underpinning balance sheet strength INTERIM RESULTS 2017 For personal use only • Gearing was 55.9%, increasing 7.3 percentage points from June 2016 – Near-term gearing expected to remain around the high end of target range (45% to 55%) as the fleet programme nears comple
Slide 18: Fuel cost outlook and sensitivities
Fuel cost outlook and sensitivities INTERIM RESULTS 2017 For personal use only 2017 Fuel cost outlook 2H 2017 Fuel cost sensitivity (inclusive of hedging) 1,000 440 846 ~8201 800 NZD Fuel cost (m) 430 NZD millions 600 484 ~4301 420 390 362 400 410 200 0 400 1H 2H FY $60.0 $62.5 $65.0 $67.5 $70.0 201
Slide 19: Christopher Luxon, Chief Executive Officer
INTERIM RESULTS 2017 For personal use only Christopher Luxon Chief Executive Officer
Slide 20: Full year capacity growth
Full year capacity growth INTERIM RESULTS 2017 For personal use only Sector 2H 2017 capacity Full year capacity Domestic ~+11% ~+9% Tasman & Pacific Islands ~+6% ~+5% International Long-haul ~+3% ~+6% Group ~+5% ~+6% 20
Slide 21: 2017 outlook
2017 outlook INTERIM RESULTS 2017 For personal use only Based on the current market environment and expectations for the average jet fuel price in the second half of the year of US$ 65/bbl1, we are targeting 2017 earnings before taxation to be in the range of $475 to $525 million2 1 Refers to Singap
Slide 22: Interim Results 2017
For personal use only INTERIM RESULTS 2017
Slide 23: Supplementary slides
INTERIM RESULTS 2017 For personal use only Supplementary slides
Slide 24: Hedging
Hedging INTERIM RESULTS 2017 For personal use only Fuel hedging* U.S. dollar hedging 2H 2017 1H 2018 2H 2017 2018 (Jan – Jun 2017) (Jul – Dec 2017) (Jan – Jun 2017) Brent collars Hedged value US$367 million US$360 million Volume 3,415,000 2,157,500 Hedged rate (NZD/USD) 0.70 0.72 Ceiling Price (USD)
Slide 25: Financial overview
Financial overview INTERIM RESULTS 2017 For personal use only Dec 2016 Dec 2015 Movement Movement $M $M $M % Operating revenue 2,584 2,698 (114) (4.2%) Earnings before taxation 349 457 (108) (24%) Net profit after taxation 256 338 (82) (24%) Operating cash flow 376 541 (165) (30%) Net cash position*
Slide 26: Group performance metrics
Group performance metrics INTERIM RESULTS 2017 For personal use only Dec 2016 Dec 2015 Movement* Passengers carried (‘000s) 8,086 7,757 4.2% Available seat kilometres (ASKs, millions) 21,409 19,985 7.1% Revenue passenger kilometres (RPKs, millions) 17,790 16,864 5.5% Load factor 83.1% 84.4% (1.3 pts
Slide 27: Projected aircraft in service
Projected aircraft in service INTERIM RESULTS 2017 For personal use only • Boeing 767-300ERs exiting by March 2017 • Beech 1900Ds exited service in August 2016 Aircraft fleet age in years (seat weighted) 8.0 7.0 7.0 6.6 6.2 2017 2018 2019 2020 2021 Boeing 777-300ER 7 7 7 7 7 Boeing 777-200ER 8 8 8 8
Slide 28: Glossary of terms
Glossary of terms INTERIM RESULTS 2017 For personal use only Available Seat Kilometres (ASKs) Number of seats operated multiplied by the distance flown (capacity) Cost/ASK (CASK) Operating expenses divided by the total ASK for the period Gearing Net Debt / (Net Debt + Equity); Net Debt includes capi