Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 FY2012 Earnings Presentation
29 slides from Air New Zealand's earnings presentation, Feb 24, 2012
Slide 1: Interim Shareholder Review 2012
ASTAR ALLIANCE MEMBER 35 lf ei New Zealand » interim Shareholder Review 2012 SS =! : Ss 2OI2 ATWAIRLINE OF THE YEAR Air New Zealand InterimShareholderReview | 2012
Slide 2: Overview
Overview For personal use only • 2012 interim results • External environment • Strategy to achieve improved financial performance • Conclusion • Supplementary information 2
Slide 3: 1H12 Financial Results
1H12 Financial Results For personal use only December December Dollar Percentage 2011 2010 movement movement Operating revenue $2,291m $2,236m $55m 2.5% Normalised earnings* $33m $112m ($79m) (70.5%) Net profit after tax $38m $98m ($60m) (61.2%) Operating cash flow $146m $210m ($64m) (30.5%) Net cas
Slide 4: Group Operating Statistics
Group Operating Statistics For personal use only December December Movement* 2011 2010 Passengers carried 6.75m 6.80m (0.6%) Available seat kilometres (ASKs) 16,641m 16,804m (1.0%) Revenue passenger kilometres (RPKs) 13,785m 14,149m (2.6%) Load factor 82.8% 84.2% (1.4pts) Yield (cents per RPK) 13.5
Slide 5: Key Drivers of Result
Key Drivers of Result For personal use only • Solid performance on domestic network • Improved market share on Tasman through Seats to Suit and Virgin Australia alliance • International Long Haul Network has been challenging in Europe and Japan • Continued escalation in fuel costs eroded earnings 5
Slide 6: Changes in Profitability
Changes in Profitability For personal use only $NZm $36m ($173m) 200 $62m 150 $92m ($14m) ($25m) $112m 100 ($21m) ($14m) ($15m) $21m $54m 50 ($7m) $33m 0 Maintenance Net Finance Exchange Cost s Other Hedge Passenger Revenue Other Revenue Foreign Labour Before Taxation Dec 2011 and Leases Dec 2010 Fu
Slide 7: External Environment
External Environment For personal use only • Continued escalated fuel prices combined with weakness in the global economy makes it challenging to recover increased costs through fare initiatives • Continued weakness in European and Japanese travel markets • Industry likely to suffer from over capaci
Slide 8: Solid Foundation
Solid Foundation For personal use only Strong Domestic Profitable Tasman and Network Pacific Island Network People Powerful engine producing innovation, ‘can do’ attitude and award winning customer service 8
Slide 9: Profit Erosion Demands Change to Improve Financial Performance
Profit Erosion Demands Change to Improve Financial Performance For personal use only Weak travel markets in Escalating Europe and fuel prices Japan Under- performance of International Network ERODED PROFITS 9
Slide 10: The Right Markets with the Right Capacity, Aircraft, Product and Partnerships
The Right Markets with For personal use only the Right Capacity, using the Right Aircraft with the Right Product and supported by the Right Partnerships 10
Slide 11: The Right Markets
The Right Markets For personal use only • End of line carrier with the majority of our customers inbound leisure travellers therefore are reliant on ongoing attractiveness of NZ as a tourist destination • The key is converting the high level of awareness and interest in NZ into actual travel from ou
Slide 12: The Right Capacity
The Right Capacity For personal use only • Matching capacity to demand • Seasonally adjusting current routes and redirecting to potential new markets • Ability to improve utilisation of network and current wide body fleet • Two more B747s exiting fleet, leaving two remaining aircraft until the B787s
Slide 13: The Right Aircraft
The Right Aircraft For personal use only • Now have five B777-300ERs in the fleet using 23% less fuel than B747s • Ability to flex fleet size in medium term • Operating more efficient aircraft but still hindered by the delay of B787 • We have now reached an agreement with Boeing regarding the new te
Slide 14: The Right Product
The Right Product For personal use only • Product features people value and price perceptions of long haul and short haul travellers vary and valued differently by different customers • Therefore need a product and service that is valued by customers, at a price they are prepared to pay • Retain att
Slide 15: The Right Partnerships
The Right Partnerships For personal use only • Consolidation is increasing through partnerships like the trans-Tasman alliance we have with Virgin Australia • Key is finding the right alliance partners that complement the Air New Zealand experience and network • New relationship with ANA, a Star All
Slide 16: Addressing Escalating Fuel Costs
Addressing Escalating Fuel Costs For personal use only • The price of jet fuel has doubled over the last 3 years • Escalating fuel costs are compounded by the nature of long haul travel • Necessary to adapt business to perform in a high fuel price environment • To address this we triggered a cost re
Slide 17: Profit Improvement of $195m+ by FY15
Profit Improvement of $195m+ by FY15 For personal use only TOTAL BY Overhead Costs $60m FY13 Ancillary Revenue $40m FY14 Network $60m FY14 Fleet $35m FY15 Supply Chain and Project underway to identify further opportunities Labour Efficiency TOTAL $195m+ The profit improvement of $195m+ by FY15 inclu
Slide 18: Conclusion
Conclusion For personal use only • Disappointing result in tough global environment • Continuously assessing new revenue generating opportunities • Realistic about current challenges but have a strategy to address and improve profitability • The trading environment remains uncertain and fuel prices
Slide 19: Supplementary Information
Supplementary Information For personal use only • Network maps • Cost efficiency • Current fuel hedge position • Currency hedging • Normalised earnings • Network performance • Current operating fleet • Aircraft capital commitments 19
Slide 20: New Zealand Network
New Zealand Network For personal use only Air New Zealand 20
Slide 21: Tasman and Pacific Island Network
Tasman and Pacific Island Network For personal use only Air New Zealand and Virgin Australia alliance Virgin Australia 21
Slide 22: International Network
International Network For personal use only Air New Zealand Star Alliance and key codeshare partners 22
Slide 23: Cost Efficiency
Cost Efficiency For personal use only December December 2011 (cents) 2010 (cents) Cost per ASK (CASK) 11.72 10.91 Exclude: Fuel (3.80) (3.16) FX hedges (0.25) (0.43) Equity derivatives (0.02) 0.11 CASK (excl. Fuel, FX hedges & equity derivatives) 7.65 7.43 23
Slide 24: Current Fuel Hedge Position
Current Fuel Hedge Position* For personal use only • The second half of FY12 is 55% hedged Volume bbls Ceiling USD Floor USD WTI collars 1,965,000 $105.97 $87.18 • The first half of FY13 is 5% hedged Volume bbls Ceiling USD Floor USD WTI collars 170,000 $106.40 $82.26 * Fuel hedge position as at 15
Slide 25: Currency Hedging
Currency Hedging For personal use only • The second half of FY12 US dollar operating cash flow exposure is approximately 91% hedged at an average NZ$/US$ rate of 0.7595 • The FY13 operating cash flow exposure is 50% hedged at an average NZ$/US$ rate of 0.7857 25
Slide 26: Normalised Earnings
Normalised Earnings* For personal use only December December 2011 2010 Earnings before Taxation (per NZ IFRS) $54m $115m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives ($27m) ($2m) Foreign exchange derivatives $6m ($1m) Normalised Earnin
Slide 27: Network Performance
Network Performance For personal use only Domestic New Zealand Tasman /Pacific Island International Long Haul Group Interim Interim Move- Interim Interim Move- Interim Interim Move- Interim Interim Move- 2012 2011 ment* 2012 2011 ment* 2012 2011 ment* 2012 2011 ment* Pax 4,351 4,391 (0.9%) 1,595 1,5
Slide 28: Current Operating Fleet
Current Operating Fleet For personal use only Aircraft Type June 2011 December 2012 February 2011 Movement 2011 Movement 2012 Boeing 747-400 5 (1) 4 (1)* 3 Boeing 777-300ER 3 1 4 1 5 Boeing 777-200ER 8 - 8 - 8 Boeing 767-300ER 5 - 5 - 5 Airbus A320-200 14 2 16 - 16 Boeing 737-300 15 (1) 14 - 14 ATR
Slide 29: Aircraft Capital Commitments
Aircraft Capital Commitments For personal use only $NZm 800 Aircraft Capital Commitments 700 1. Includes progress 600 payments on aircraft. 500 2. Assumes NZD/USD = 0.83 400 3. Excludes capitalised 300 maintenance of approximately $50m per 200 annum and non aircraft 100 capital commitments. 0 FY12 F