Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2015 Earnings Presentation
32 slides from Air New Zealand's earnings presentation, Aug 26, 2015
Slide 1: 2015 Annual Results
For personal use only 2015 Annual Results 26 August 2015 Christopher Luxon CEO Rob McDonald CFO 1
Slide 2: The year in review
The year in review For personal use only Another year of earnings growth: • Normalised earnings* before taxation $496 million, up 49.4% • Statutory net profit after taxation $327 million, up 24.3% • Very strong operating cash flow $1.1 billion, up 50.7% Normalised Normalised Statutory earnings Share
Slide 3: Key drivers in our record result
Key drivers in our record result For personal use only • Capacity and demand strong – ASKs and RPKs both up 6.6% • Operating revenue $4.9 billion, up 5.9% • Passenger revenue up 6.8% ahead of capacity growth • Cargo revenue strong up 10.5% • Simplification of the business, accelerate growth and take
Slide 4: Record operating cash flow
Record operating cash flow For personal use only • Operating Cash Flow $1.1 billion, up $0.4 billion • Increase of 50.7% • Strong cash flows allowed for the early repayment of borrowings • Advance payments on aircraft of $162 million to take advantage of additional credits made available 4
Slide 5: Changes in profitability
Changes in profitability For personal use only 5
Slide 6: Domestic
Domestic For personal use only • Capacity growth 3.8% • Replacement of B737-300 with larger A320 aircraft and additional ATR72s • Strong performance on our domestic network with demand outstripping capacity – filling capacity and growing yields • On time performance (OTP) was world class at 90.0% fo
Slide 7: Tasman & Pacific Islands
Tasman & Pacific Islands For personal use only • Overall capacity growth of 2.5% with Pacific Island routes growing 7.5% • Increased utilisation of wide-body aircraft on Sydney, Brisbane, Melbourne, Perth, Nadi – including introduction of Premium Economy from October 2015 • Virgin Australia alliance
Slide 8: International
International For personal use only • Significant growth on international routes with capacity up 10.0% - H1 1.2%, H2 18.7% • Second half growth includes recommencement of operations to Singapore • Increased capacity from additional North America and Japan services and deployment of B787-9 on Auckla
Slide 9: Cargo
Cargo For personal use only • Strong volume and revenue growth • Capacity increases and new routes allowed for increased volume • Growth particularly strong on Pacific long-haul and into Asia and the introduction of Singapore route Revenue Volume Yield up up down 10.5%* 11.2% 0.7%* * Excluding the i
Slide 10: FY15 capacity increased 6.6%
FY15 capacity increased 6.6% 1st half = 1.7%, 2nd half = 11.6% iN) Tasman & Pacific Islands 2.5% 6 Total international long-haul growth 10.0% iy) Domestic New Zealand 3.8% @ North America & Europe 3.1% <p
Slide 11: Reduction in CASK delivers $174m of value
Reduction in CASK delivers $174m of value For personal use only 11
Slide 12: Virgin Australia investment
Virgin Australia investment For personal use only • Improved result in 2015 • Impact on Air NZ results is equity accounted loss of NZ$29 million • Strong improvement and turnaround in performance of Domestic and Tiger • Domestic network seeing positive yield growth, a market leader in On Time Perfor
Slide 13: Financial management
Financial management For personal use only • Net cash on hand of $1.3 billion, up 7.1% • Gearing moved up to 52.4%, up from 42.9% in prior year – due to additional debt and FX offset by profitability • Fully imputed final ordinary dividend of 9.5 cents per share, an increase of 72.7% on prior year’s
Slide 14: Aircraft capital expenditure
Aircraft capital expenditure For personal use only • Investment of $2.6 billion in aircraft and associated assets over the next 4 years • Includes progress payments on aircraft • Assumes NZD/USD = 0.66 • Excludes capitalised maintenance of approximately $79 million p.a. and non-aircraft capital comm
Slide 15: Fleet update
Fleet update For personal use only * Excludes orders of up to five A320/A321 NEOs with purchase substitution rights 15
Slide 16: Strategic Update
For personal use only Strategic Update
Slide 17: Value creation through growth
Value creation through growth For personal use only OUR STRATEGIC PRIORITIES Grow and develop markets Realign our business for growth MARKETS Grow contribution from alliance partners Grow, simplify and modernize our fleet EFFICIENCY Simplify our business to drive down cost CUSTOMER Grow a consistent
Slide 18: Grow and develop our markets
Grow and develop our markets For personal use only • Grow total capacity 11% in FY16 – 8% growth in domestic and 15% international • Entry into South America • Grow North America • Expanding presence in Australia and Asia • New routes to Buenos Aires and Houston o Both routes operating on our refurb
Slide 19: Efficiency
Efficiency For personal use only • Invest in modern, fuel efficient aircraft – seat weighted average fleet age down to 7.5 years in 2016 • Reduce number of fleet types: o Boeing 747s exited, last two Boeing 737s leave the fleet in Sept 2015, commenced exit of Beech 1900, Boeing 767s exit from March
Slide 20: Grow a consistent and personalised customer experience
Grow a consistent and personalised customer experience For personal use only • Invest for world class customer experience: o Configure our inflight product to what customers value o Upgrade our airport lounges – a four year lounge programme of around $100 million of which we are a quarter of the way
Slide 21: Grow high performance culture and capability
Grow high performance culture and capability For personal use only • Attract the best people to be part of our winning team • Strong brand and corporate reputation • Investment in our people’s development to drive performance, lift engagement and improve capability across the business • Top quartile
Slide 22: Unleash digital transformation
Unleash digital transformation For personal use only • Aim to create a leading digital organisation in Australasia and to be one of the best digital airlines globally • A new Chief Digital Officer executive role and function has been created • Objective to unleash digital transformation for our cust
Slide 23: FY2016 Outlook
For personal use only FY2016 Outlook
Slide 24: FY16 capacity increasing 11%
FY16 capacity increasing 11% 1st half = 16%, 2nd half = 5% i) Total international long-haul growth 15% @ Tasman & Pacific Islands 4% @ domestic New Zealand 7) @ North America & Europe + 7) lp South America NEW MARKET
Slide 25: Jet fuel and currency
Jet fuel and currency For personal use only Jet Fuel • Average jet fuel price per barrel, including hedging, was down 14% (in USD) in FY15. • Based on US$60 Singapore jet fuel price, the impact of the reduction in jet fuel prices on FY16 compared to FY15 is $293 million. This price impact is improve
Slide 26: Outlook – FY2016
Outlook – FY2016 For personal use only We look forward to an exciting year ahead with 11% planned capacity growth including two new international destinations and substantial domestic growth Given the current known operating environment, along with our increased capacity and improved operating e
Slide 27: Thank you
For personal use only Thank you <p
Slide 28: Supplementary slides
For personal use only slides Supplementary
Slide 29: Financial overview
Financial overview For personal use only * Dividends are fully imputed 29
Slide 30: Normalised earnings reconciliation
Normalised earnings reconciliation For personal use only *Normalised earnings represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net movements on derivatives that hedge exposures in other financial periods. Normalised earnings is a non-IFRS financial performan
Slide 31: Group performance metrics
Group performance metrics For personal use only * Calculation based on numbers before rounding. ** Excluding the impact of foreign exchange, yield increased by 0.9%. 31
Slide 32: Fuel hedging
Fuel hedging * For personal use only * Fuel hedging as at 14 August 2015 32