Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 FY2014 Earnings Presentation
24 slides from Air New Zealand's earnings presentation, Feb 27, 2014
Slide 1: 2014 Interim Financial Results
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Slide 2: Overview
OVERVIEW For personal use only > Normalised earnings* before taxation of $180 million, up 29% > Statutory earnings before taxation of $197 million, $140 million after tax > Operating revenue of $2.3 billion > Strong operating cash flow of $300 million > Continued earnings growth * Normalised earning
Slide 3: Result Highlights
RESULT HIGHLIGHTS For personal use only > Passenger revenue up 2.4%* to $1.9 billion > Growth in local currency yield and load factors > Long haul network now realigned and performing well > Strong financial result despite significant transitional labour costs Passengers carried (‘000s) 6,927 6,792
Slide 4: Changes in Profitability
CHANGES IN PROFITABILITY For personal use only NZ$m $197m 200 $30m ($34m) $1m $180m 180 $4m $9m $11m 160 $15m ($24m) $43m $139m 140 ($14m) 120 100 80 60 40 20 0 Dec 2012 Normalised Dec 2013 Normalised Passenger Traffic Services & Other Other Labour Fuel Passenger Yield Other Expenses Net Impact of F
Slide 5: Domestic
DOMESTIC For personal use only > New A320s delivering lower cost base as older B737s exit > New ATR72-600s providing additional turboprop capacity > Competitive fares stimulating demand > Positive economic outlook Passengers carried (‘000s) 4,465 4,350 2.7% Available seat kilometres (ASKs) 2,692m 2,
Slide 6: Tasman & Pacific Islands
TASMAN & PACIFIC ISLANDS For personal use only > Achieving higher load factors than competitors > Virgin Australia alliance expands network reach and maintains strong market position > Weaker Australian dollar impacting yields Passengers carried (‘000s) 1,698 1,658 2.4% Available seat kilometres (AS
Slide 7: International
INTERNATIONAL For personal use only > Network realignment has driven improved profitability > Capacity increases in growing and high performing markets > Exits from poor performing Auckland-Osaka and Hong Kong-London routes > Pacific Rim growth focus Passengers carried (‘000s) 764 785 (2.7%) Availab
Slide 8: Cargo
CARGO For personal use only > Global Cargo market continues to be challenging > Volume down 3% due to withdrawal of Hong Kong-London route > Yield decline of 5% due to competitive market environment
Slide 9: Continuous Cost Improvement
CONTINUOUS COST IMPROVEMENT For personal use only > Current year includes $24 million of transitional labour costs (0.14 cents per ASK) > Fleet modernisation, fleet simplification and scale economies from growth will continue reducing our cost base in the future Cost per ASK* 10.84 11.17 Exclude: Fu
Slide 10: Financial Management
FINANCIAL MANAGEMENT For personal use only > Net cash on hand $1.13 billion > Gearing at 43.9% > Fully imputed interim dividend of 4.5 cents per share, an increase of 50% > Average fleet age of 9.3 years* > Moody’s investment grade rating of Baa3, outlook stable * Seat weighted basis
Slide 11: Aircraft Capital Expenditure
AIRCRAFT CAPITAL EXPENDITURE For personal use only 800 > Investment of $1.8 billion in aircraft over the next 3.5 years 700 600 > Includes progress payments on aircraft 500 400 > Assumes USD/NZD = 0.8300 300 200 > Excludes capitalised maintenance of approximately $50m 100 and non-aircraft capital co
Slide 12: Loyalty
LOYALTY For personal use only > Now at 1.5 million members, up 15% year on year > Recent refresh and rebrand announced, changes effective 31 March 2014 > Airpoints Dollars to be earned on every regularly available fare* > Incentives realigned to reward most valuable customers * Excludes last minute
Slide 13: Customer Experience
CUSTOMER EXPERIENCE For personal use only > Online check-in now available > International long haul self check-in kiosks > New mobile app launched > Mobile sales channel now exceeding $1 million per week > Lounge upgrades underway
Slide 14: Alliances
ALLIANCES For personal use only > Virgin Australia alliance reauthorised until 31 October 2018 > Cathay Pacific alliance enabling improved Hong Kong route performance > Star Alliance offers 1,328 destinations through our 27 partner airlines
Slide 15: New Alliance with Singapore Airlines
NEW ALLIANCE WITH SINGAPORE AIRLINES For personal use only > Air New Zealand to re-commence flying to Singapore > Revenue sharing alliance with Singapore Airlines > Codeshare on Singapore Airlines and SilkAir networks > Comprehensive network into South East Asia UK / Europe South Africa Indi
Slide 16: Investment in Virgin Australia
INVESTMENT IN VIRGIN AUSTRALIA For personal use only > Equity investment increased to 24.5% > Recent capital raising consolidates Virgin’s balance sheet > Well positioned to capitalise on long term growth in domestic Australia market > Board seat to be taken up
Slide 17: Strategic Priorities
For personal use only STRATEGIC PRIORITIES
Slide 18: Outlook
OUTLOOK For personal use only With stable fuel prices and a traditional seasonal earnings pattern of a stronger first half, we expect normalised earnings before taxation to exceed for the full year
Slide 19: Supplementary Slides
For personal use only SUPPLEMENTARY SLIDES
Slide 20: Financial Overview
FINANCIAL OVERVIEW For personal use only Operating revenue $2,330m $2,368m ($38m) (2%) Normalised earnings * before taxation $180m $139m $41m 29% Statutory earnings before taxation $197m $141m $56m 40% Statutory net profit after taxation $140m $100m $40m 40% Operating cash flow $300m $343m ($43m) (1
Slide 21: Jet Fleet (Projected)
JET FLEET (PROJECTED) For personal use only FY14 FY15 FY16 FY17 FY18 Boeing 777-300 5 7 7 7 7 Boeing 777-200 8 8 8 8 8 Boeing 787-9 - 3 6 8 10 Boeing 767-300 5 5 2 - - Boeing 747-400 2 - - - - Airbus A320 22 25 27 27 27 Boeing 737-300 7 2 - - -
Slide 22: Foreign Exchange Hedging
FOREIGN EXCHANGE HEDGING For personal use only > The second half of FY14 US dollar operating cash flow exposure is approximately 90% hedged at an average NZD/USD rate of 0.8245. > The FY15 operating cash flow exposure is 53% hedged at an average NZD/USD rate of 0.8295.
Slide 23: Fuel Hedging
FUEL HEDGING* For personal use only > The second half of FY14 is 72% hedged > The first half of FY15 is 33% hedged Brent swaps 37,500 105.02 WTI swaps 37,500 95.80 Brent collars 2,317,500 104.60 96.88 WTI collars 200,000 98.22 89.31 Brent swaps 175,000 104.44 WTI swaps 187,500 95.80 Brent collars 72
Slide 24: Normalised Earnings
NORMALISED EARNINGS For personal use only Earnings before taxation (per NZ IFRS) $197m $141m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives ($17m) ($2m) Normalised earnings* before taxation $180m $139m *Normalised earnings represents Ear