Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2024 Earnings Presentation
35 slides from Air New Zealand's earnings presentation, Aug 29, 2024
Slide 1: Annual Financial Results Investor Presentation 2024
Annual Financial Results Investor Presentation 2024 AIR NEW ZEALAND 2024 ANNUAL RESULTS 1
Slide 2: Forward-Looking Statements and Disclaimer
F O R WA R D - L O O K I N G S TAT E M E N T S A N D D I S C L A I M E R This presentation is given on behalf of Air New Zealand Limited (NZX: AIR and looking statements and undue reliance should not be placed on any forward- AIR030; ASX: AIZ). The information in this presentation: looking statement
Slide 3: Business Update
BUSINESS UPDATE GREG FORAN CHIEF EXECUTIVE OFFICER AIR NEW ZEALAND 2024 ANNUAL RESULTS 3
Slide 4: 2024 Year in Review
2024 YEAR IN REVIEW $222m 16.5m $459m earnings before tax Passengers flown Cargo revenue includes $90m of unused credit breakage Up 4% on last year above pre-Covid levels despite increased competition Customer satisfaction ~$100m adverse impact On-time performance up at pre-Covid levels to FY24 earn
Slide 5: We Are Facing Our Challenges Head On
WE ARE FACING OUR CHALLENGES HEAD ON P U T T I N G M I T I G AT I O N S I N P L AC E T O P R O T E C T O U R N E T W O R K AN D S C H E D U L E Challenges with Economic slowdown Influx of competition Cost inflation aircraft availability in New Zealand on North America • Targeted capacity reductions
Slide 6: Continued Focus on Delivery of Our Kia Mau Strategy
CONTINUED FOCUS ON DELIVERY OF OUR KIA MAU STRATEGY W I L L U N L O C K F U T U R E O P P O R T U N I T I E S F O R T H E AI R L I N E Grow Elevate Lift domestic international loyalty • New and enhanced self-service • Reinvigorated Seats to Suit offering • Retail partnership ecosystem offerings for
Slide 7: Financial Update
FINANCIAL UPDATE RICHARD THOMSON CHIEF FINANCIAL OFFICER AIR NEW ZEALAND 2024 ANNUAL RESULTS 7
Slide 8: Financial Summary
FINANCIAL SUMMARY Earnings/(Loss) Before Taxation • Operating revenue of $6.8 billion, up 7% ($ millions) • Passenger revenue of $5.9 billion, up 11% Covid-19 impacted • Cargo revenue of $459 million, down 27% on last year period but up 18% on pre-Covid 574 • Earnings before taxation of $222 million
Slide 9: Profitability Waterfall
PROFITABILITY WATERFALL Additional commentary • Significant activity increases when comparing to FY23 due to 17% growth in capacity • Broad based inflation of 6% across the non-fuel cost base, a headwind of $225 million on the FY24 result • Estimate that earnings would be ~$100 million higher, net o
Slide 10: Aircraft Availability and Compounded Inflation
AIRCRAFT AVAILABILITY AND COMPOUNDED INFLATION D R I V I N G A D E T E R I O R AT I O N I N U N D E R LY I N G C AS K • Reported CASK improved 1.6% compared to last year, largely due to fuel price movements and mix of longer sector flying in the period, offset by the impact of inflation • Excluding
Slide 11: Significant Cost Inflation in Recent Years
SIGNIFICANT COST INFLATION IN RECENT YEARS EXPECTED TO CONTINUE INTO FY25 Additional commentary Direct labour1 (price only) Variable operating costs2 (price only) Total cost base2 (price only) • Landing charges, air ($ millions) ($ millions) ($ millions) navigation fees and engineering materials dri
Slide 12: Mitigating Fuel Price and FX Volatility Through Hedging
MITIGATING FUEL PRICE AND FX VOLATILITY THROUGH HEDGING 2025 Fuel cost3 sensitivity Fuel hedging • Currently hedging Brent Crude only; exposed to pricing 1 Unhedged Hedged 2,000 movements in the crack spread 1,900 NZD cost of fuel (millions) 1,800 • Hedged with collar structures, with focus on ensur
Slide 13: Fleet Investment Update
FLEET INVESTMENT UPDATE F O R E C AS T D E L I V E RY P R O F I L E S T R E T C H E S 7 8 7 O R D E R • Forecast investment of $3.2 billion in aircraft OUT TO FY29 and associated assets through to 2029 Actual and forecast aircraft capital expenditure1 • Re-phasing of 787 order updated from the 1,200
Slide 14: Our Capital Management Framework Drives Financial Resilience
OUR CAPITAL MANAGEMENT FRAMEWORK DRIVES FINANCIAL RESILIENCE AND SUSTAINABLE SHAREHOLDER VALUE S O L I D P R O G R E S S I N F Y 2 4 T O M O V E T O WA R D S O U R TA R G E T S PROGRESS MADE IN FY24 Maintain financial resilience and flexibility • Cash purchase of two domestic A321neo aircraft • Targ
Slide 15: Outlook
OUTLOOK GREG FORAN CHIEF EXECUTIVE OFFICER AIR NEW ZEALAND 2024 ANNUAL RESULTS 15
Slide 16: FY25 Capacity Temporarily Constrained by Aircraft Availability
FY25 CAPACITY TEMPORARILY CONSTRAINED BY AIRCRAFT AVAILABILITY 2024 ASKs 1H 2025 2H 2025 2025 Estimated Sector (millions) (vs 1H 2024) (vs 2H 2024) Capacity1 Domestic 6,620 Flat 0% to 5% up 0% to 3% up Tasman and Pacific 11,655 Flat 0% to 5% up 0% to 3% up Islands International long-haul 23,792 0% t
Slide 17: 2025 Outlook
2025 OUTLOOK We have outlined a number of trading conditions that have significantly impacted our result for the second half of the 2024 financial year, in particular the tougher economic backdrop in New Zealand driving softness in demand, the cumulative impact of inflationary cost pressures, the im
Slide 18: AIR NEW ZEALAND 2024 ANNUAL RESULTS
AIR NEW ZEALAND 2024 ANNUAL RESULTS 18
Slide 19: Supplementary Information
SUPPLEMENTARY INFORMATION AIR NEW ZEALAND 2024 ANNUAL RESULTS 19
Slide 20: Cargo Performance
CARGO PERFORMANCE • Cargo revenue of $459 million, down 27% on prior year but up 18% on pre-Covid levels. Key drivers include: Cargo revenue down 27% ‒ Volume up driven by significant driven by: capacity growth, particularly in Revenue Volumes 19% down international long-haul ‒ No cargo-only flying
Slide 21: Key Capital Management Metrics
K E Y C A P I TA L M A N A G E M E N T M E T R I C S Capital management targets 30 Jun 2024 30 Jun 2023 (effective from FY24)1 Gross debt2 (2,816) (3,335) Cash, restricted deposits and net open 2,044 2,928 derivatives2 Net debt2 (772) (407) Gross debt/EBITDA 2.9x 2.5x Net Debt to EBITDA ratio of Net
Slide 22: Debt Structure and Maturity Profile
D E B T S T R U C T U R E A N D M AT U R I T Y P R O F I L E Capital structure as at 30 Jun 2024 Debt maturity profile as at 30 June 2024 • Gross Debt of $2.8 billion comprising: ($ millions) – ~$1.4 billion secured aircraft debt and finance leases1 – $720 million operating leases1 – $686 million un
Slide 23: Unencumbered Aircraft of ~$1.6 Billion
UNENCUMBERED AIRCRAFT OF ~$1.6 BILLION Unencumbered aircraft as at 30 Jun 2024 Aircraft values and capital mix ($ billions2,3) 777-300ER 1x 4.8 4.8 In addition to $1.6 billion in unencumbered aircraft, 787-9 1x there is significant equity value within financing structures1. A320/321neo 7x A320ceo 11
Slide 24: Fuel Cost Movement
FUEL COST MOVEMENT $134 million (9%) effective decrease in fuel price 293 (135) 34 1 Jun 2024 1,692 Decrease in hedge loss 1,499 jet fuel price of $18m US$113 to vs US$105 Jun 2023 per barrel hedge loss of $17m 2023 FUEL COST VOLUME UNDERLYING NET HEDGING FX 2024 FUEL COST PRICE IMPACT MOVEMENTS AIR
Slide 25: Financial Overview
FINANCIAL OVERVIEW Jun 2024 Jun 2023 Movement Movement $M $M $ % Operating revenue 6,752 6,330 422 7% Earnings before taxation 222 574 (352) (61%) Net profit after taxation 146 412 (266) (65%) Operating cash flow 810 1,853 (1,043) (56%) Cash position 1,279 2,227 (948) (43%) AIR NEW ZEALAND 2024 ANNU
Slide 26: Group Performance Metrics
GROUP PERFORMANCE METRICS Jun 2024 Jun 2023 Movement1 % Passengers carried (‘000s) 16,460 15,776 4% Available seat kilometres (ASKs, millions) – passenger flights 42,067 34,281 23% Available seat kilometres (ASKs, millions) – passenger and cargo- 42,067 35,961 17% only flights Revenue passenger kilo
Slide 27: Domestic
DOMESTIC Jun 2024 Jun 2023 Movement1 % Passengers carried (‘000s) 10,721 10,946 (2%) Available seat kilometres (ASKs, millions) – passenger flights 6,620 6,685 (1%) Revenue passenger kilometres (RPKs, millions) 5,571 5,679 (2%) Load factor 84.2% 84.9% (0.7 pts) Passenger revenue per ASKs as reported
Slide 28: Tasman & Pacific Islands
TA S M A N & PA C I F I C I S L A N D S Jun 2024 Jun 2023 Movement1 % Passengers carried (‘000s) 3,811 3,352 14% Available seat kilometres (ASKs, millions) – passenger flights 11,655 10,237 14% Revenue passenger kilometres (RPKs, millions) 9,831 8,707 13% Load factor 84.3% 85.1% (0.8 pts) Passenger
Slide 29: International Long-Haul
I N T E R N AT I O N A L L O N G - H A U L Jun 2024 Jun 2023 Movement1 % Passengers carried (‘000s) 1,928 1,478 30% Available seat kilometres (ASKs, millions) – passenger flights 23,792 17,359 37% Revenue passenger kilometres (RPKs, millions) 18,883 14,646 29% Load factor 79.4% 84.4% (5.0 pts) Passe
Slide 30: Aircraft Delivery Schedule
AIRCRAFT DELIVERY SCHEDULE Aircraft delivery schedule (as at 30 June 2024)1 Number Expected delivery dates Number in (financial year) on existing order 2025 2026 2027 2028 2029 fleet Boeing 787 12 8 - 2 3 1 2 Owned Fleet on Order Airbus A320neo / A321neo 13 2 - - 2 - - ATR 72-600 29 2 2 - - - - Oper
Slide 31: Fleet Age Update
F L E E T A G E U P D AT E Aircraft fleet age in years (seat weighted)1 10.1 Fleet type 2024 2025 2026 9.3 8.7 7.9 Boeing 777-300ER2 9 10 10 7.1 7.3 6.7 Boeing 787 14 14 16 Airbus A320 17 17 17 Airbus A320/A321neo 18 20 20 ATR72-600 29 31 31 Bombardier Q300 23 23 23 Total Fleet 110 115 117 2020 2021
Slide 32: Unused Customer Credits
UNUSED CUSTOMER CREDITS • As at 30 June 2024, $212 million of unused customer credits were included in Transportation Sales in Advance (compared with 30 June 2023 balance of $282 million) 212 • Within that $212 million, $186 million relate to a flexibility policy over the January 2020 to September 2
Slide 33: Glossary of Key Terms
GLOSSARY OF KEY TERMS 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) Earnings before interest, tax, depreciation Operating earnings
Slide 34: Find Information on Air New Zealand
F I N D I N F O R M AT I O N O N A I R N E W Z E A L A N D Resources Investor website: www.airnewzealand.co.nz/investor-centre Monthly traffic updates: www.airnewzealand.co.nz/monthly-investor-updates Corporate governance: www.airnewzealand.co.nz/corporate-governance Sustainability: https://www.airn
Slide 35: AIR NEW ZEALAND 2024 ANNUAL RESULTS
AIR NEW ZEALAND 2024 ANNUAL RESULTS 35