Air New Zealand Limited · NZX:AIR
Air New Zealand — First NZ Capital / CSFB Conference 2002
24 slides from Air New Zealand's conference presentation, Nov 12, 2002
Slide 1: Air New Zealand
Air New Zealand First NZ Capital / CSFB Conference London 8th November 2002
Slide 2: Presentation Outline
Presentation Outline * A Brief Recent History % Recapitalisation 3 Reorganisation % Restructuring 2° Industry Dynamics * Strategic Positioning 2 Current Trading and Outlook
Slide 3: A Challenging Year
A Challenging Year
Slide 4: A brief recent history
A brief recent history * Purchase of Ansett completed in June 2000 % Trans-Tasman network 3% Two-way feed #¢ Dual destination offering * Ansett into Voluntary Administration September 2001 % “Perfect Storm” of competition, fuel price, dollar, old model operation % September 11 * Air New Zealand batt
Slide 5: Recapitalisation
Recapitalisation * New Zealand Government recapitalised Air New Zealand % October 2001° temporary loan facility % January 2002 equity investment ~ $585m Ordinary and $300m Convertible Preference Shares ~ Post- Recap NZ Government own 82% of Air NZ * Gearing reduced from 93% to 78% * Cash applied to
Slide 6: Reorganisation
Reorganisation ** Board numbers reduced % 13108 * Senior Management team halved * 13107 * New CEO 3 New Management structure % New CFO and SVP Operations & Technical
Slide 7: Restructuring - Fleet
Restructuring - Fleet * Operating leases on existing aircraft renegotiated %¢ Substantial reductions in lease rates *%* Order for 15 A320 aircraft signed 4 July 2002 * Options on a further 20 aircraft * Deployed to short haul Pacific and Tasman routes * Operating cost benefits of approximately 15 pe
Slide 8: Presentation Outline
Presentation Outline * A Brief Recent History 3% Recapitalisation 3 Reorganisation % Restructuring * Industry Dynamics ** Strategic Positioning * Current Trading and Outlook
Slide 9: Industry losses are continuing
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Slide 10: Passenger numbers recovering
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Slide 11: But surplus capacity overhangs
ut surplus capacity overhangs — _ Oo a co i Z ye ; | s a — _ Le . L i Se | £. aree! 7 i a pee Mv acd
Slide 12: Presentation Outline
Presentation Outline * A Brief Recent History 3% Recapitalisation 3 Reorganisation % Restructuring 2° Industry Dynamics ** Strategic Positioning * Current Trading and Outlook
Slide 13: The Strategic Dilemma
. . My The Strategic Dilemma “% e Value Creating Defend and Grow yw Estimated WACC ~ Engineering Asset Intensity Profitability Oo Long Haut Value Destroying Vv Improve Performance or Reduce Exposure o Size of bubble approximates revenue of business
Slide 14: Offence as Defence
Offence as Defence * NZ Domestic markets provide core profitability * Open regulatory regime * Best defence is low cost production % Match costs to customer value * Break model before competitors do
Slide 15: Air NZ Express Class
Air NZ Express Class ** Launched 1 November 2002 ** Customer value driven * Designed to stimulate market ** Product offering matching customer value 3* -no business class, no meals % - direct sales channels have cheapest fares > Customer reaction to date % - internet sales increased from 4 to 45% 3%
Slide 16: Freedom Air
Freedom Air * Absolute low-cost carrier 3% No meals 3 No connectivity % Direct sales only % No GDS * Deployed on trans-Tasman leisure routes * Profitable on otherwise unprofitable sectors ** Fleet of four 737-300 Jets
Slide 17: Air NZ Engineering Services (ANZES)
Air NZ Engineering Services (ANZES) & AIR NEW ZEALAND : : . ENGINEERING SERVICES # Maintenance Repair and Overhaul (MRO) Services % - Air New Zealand % - External Customers “* Five Core Product Lines ~ Technical Services (Maintenance schedule management & design) ~ Airframes & Engines main revenue l
Slide 18: Tasman & Long Haul
Tasman & Long Haul * Weak pricing power due to fierce competition % Qantas, United, Singapore, Thai * NZ geographic position offers few “hub” benefits * Long distances = expensive aircraft, fewer frequencies * Customers primarily low yield % Holiday % Visiting friends or relatives
Slide 19: Strategic partnership
Strategic partnership * Air New Zealand’s objectives % Establish sustainable profitable model %¢ Regain feed from Australia %* Must build a business model that warrants investment * Convert market position into margin
Slide 20: Presentation Outline
Presentation Outline * A Brief Recent History 3% Recapitalisation 3 Reorganisation % Restructuring 2° Industry Dynamics * Strategic Positioning ** Current Trading and Outlook
Slide 21: First quarter results
First quarter results * Capacity down 7.6% - Traffic down 2.6% % Post September 11 cuts % Domestic NZ QF effects * Load factors up 3.9% % From 71.7% to 75.6% * PBUT of $30.6m *% -up from pcp loss of $51m *& NPAT of $17 million for quarter
Slide 22: Increasing FX lifts profitability
Increasing FX lifts profitability $US/NZ Dollar 08 . * Air NZ is short USD aon 7 Nn yemeteel %* Costs - fuel, leases, interest 2°“ pa 0.42 4 s* Revenue - USD ticket sales 4, 0.38 9.36 566.01 Jan-02 Feb-O2Mar-02 Apr-02 May-02Jun-02 Jul-02 Aug-02Sep-02 Les . Jet Fuel Prices * Sensitive to fuel prices
Slide 23: Outlook
Outlook * Subject to usual industry “health warnings” %¢ Global economic conditions % Terrorism / War % ~=Fuel * Impact of Express Class changes * Engineering growth % FY 2003 Profit Estimate (PBUT) $200 million
Slide 24: Air New Zealand
Air New Zealand First NZ Capital / CSFB Conference London 8th November 2002 2. S AIR NEW ZEALAND A STAR ALLIANCE MEMBER “a
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