Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 FY2010 Earnings Presentation
24 slides from Air New Zealand's earnings presentation, Feb 26, 2010
Slide 1: For personal use only
For personal use only 1
Slide 2: Highlights
HIGHLIGHTS For personal use only • Normalised earnings* $96m, up $70m • Net cash position of $1.1bn • Gearing stable at 46.0% • ATW Airline of the Year • Unveiling of new long haul product • Airpoints™ developments * Normalised earnings before taxation after excluding the net impact of derivatives t
Slide 3: More Stable Operating Environment
MORE STABLE OPERATING ENVIRONMENT For personal use only • Air travel demand bottoming out • Lower spot fuel prices, long term upward trend continues • More stable foreign exchange rates • Competition remains intense FY10 FY10 NZ$ / US$ US$ FOREIGN EXCHANGE US$ / BBL JET FUEL SPOT PRICE FY9 FY9 0.80
Slide 4: Key Influences on Profitability
KEY INFLUENCES ON PROFITABILITY For personal use only $NZ (m) 300 200 29 29 335 28 96 100 84 26 (65) (1) (12) 0 (100) (200) 15 (251) (300) (40) (9) (400) D ec 2008 Yield Traffic Cargo, Labour Fuel P rice Aircraft Sales and Net Finance Net imp act Other D ec 2009 Hed ge D ec 2009 Normalised Contract
Slide 5: Revenue Management
REVENUE MANAGEMENT For personal use only YTD RASK* Change YTD Yield Change 0% JUL AUG SEP OCT NOV DEC JAN (2%) (4%) (6%) (8%) (10%) (12%) (14%) (16%) *Revenue per Available Seat Kilometre 5
Slide 6: Long Haul Performance
LONG HAUL PERFORMANCE For personal use only • Passenger demand down 7.3% • Capacity reduced by 8.7% • Load factor improved 1.2 percentage points to 83.3% • Yield down 12.5% • Demand remained weak on Asian routes • US routes showed signs of recovery 6
Slide 7: Long Haul Revenue Management
LONG HAUL REVENUE MANAGEMENT For personal use only YTD RASK* Change Long Haul YTD Yield Change 0% JUL AUG SEP OCT NOV DEC JAN (2%) (4%) (6%) (8%) (10%) (12%) (14%) (16%) (18%) (20%) *Revenue per Available Seat Kilometre 7
Slide 8: Domestic Performance
DOMESTIC PERFORMANCE For personal use only • Demand up 4.8% • Capacity relatively unchanged • Load factor improved 3.8 percentage points to 77.2% • Changing competitive dynamics • OTP improved to 83.3%* on time • A320s on order in move to a single narrow body fleet • grabaseat™ an effective sales to
Slide 9: Tasman & Pacific Island Performance
TASMAN & PACIFIC ISLAND PERFORMANCE For personal use only • Demand down 2.9% • Reduced capacity by 10.5% • Load factor improved 6.3 percentage points • Rotorua/Sydney service launched • Sydney to Rarotonga trial service announced • Unstable market dynamics persist 9
Slide 10: Short Haul Revenue Management
For personal use only SHORT HAUL REVENUE MANAGEMENT YTD RASK* Change SHORT Haul YTD Yield Change 0% JUL AUG SEP OCT NOV DEC JAN (2%) (4%) (6%) (8%) (10%) (12%) (14%) *Revenue per Available Seat Kilometre 10
Slide 11: Other Businesses
For personal use only OTHER BUSINESSES • Cargo – Revenue down on lower volumes and yields – Cessation of Freighter lease in March 2009 • Engineering businesses continue to increase revenue – Marine & Industrial Gas Turbines 11
Slide 12: Cost Initiatives
For personal use only COST INITIATIVES • Network optimised for demand levels • Fuel efficiency initiatives continue • Employee numbers reduced by 5% since December 2008 • Continuous cost management Employee Numbers 11,200 Full time equivalent employees 11,000 10,800 10,600 10,400 10,200 10,000 Jun 2
Slide 13: The Travel Evolution Continues
THE TRAVEL EVOLUTION CONTINUES For personal use only • World-first Long Haul product from November • Continue to evolve Tasman/Pacific operations • More capacity and everyday low fares for Domestic operation with A320 arrival 13
Slide 14: Strategic Priorities
For personal use only STRATEGIC PRIORITIES • Making the most of any demand upside • Promotion and delivery of new long haul product • Managing fleet replacement programmes • Maintaining our environmental leadership position • Further development of Airpoints programme 14
Slide 15: Financial Management
For personal use only FINANCIAL MANAGEMENT • $1.1bn cash, down $0.5bn on June 2009 – debt hedge roll over – debt payments – progress payments – fixed asset additions • Gearing 46.0%, 1.0% increase on June 2009 • Average fleet age of 7.9 years • Interim dividend of 3.0 cents per share 15
Slide 16: Aircraft Capex Commitments
For personal use only AIRCRAFT CAPEX COMMITMENTS $NZm 700 600 500 400 300 200 100 0 2010 2011 2012 2013 1. Includes progress payments on aircraft and is net of sale and lease back agreements 2. Assumes NZD/USD = 0.7 3. Excludes capitalised maintenance of approximately $50m per annum and non aircraft
Slide 17: Fuel Hedging
For personal use only FUEL HEDGING* • The second half of FY10 is approx. 90% hedged with the average effective ceiling at US$76 per barrel of WTI crude oil • At current prices, the average Singapore Jet fuel price after hedging would be US$85 per barrel for the second half of FY10 compared with US$7
Slide 18: Currency Hedging
For personal use only CURRENCY HEDGING • Operating cash flow exposure for the second half of FY10 is 91% hedged at an average NZ$/US$ rate of 0.66 • The FY11 operating cash flow exposure is 69% hedged at an average NZ$/US$ rate of 0.64 • US$466m of future capex commitments are hedged at NZ$/US$ rate
Slide 19: Outlook
For personal use only OUTLOOK • Stabilisation and recovery of the trading environment • Challenge remains to improve passenger numbers and yields • We expect a more normal seasonal balance this year with the second half weaker than the first • foreign exchange hedging loss of around $20 million* in
Slide 20: Supplementary Information
For personal use only SUPPLEMENTARY INFORMATION 20
Slide 21: Financial Overview
FINANCIAL OVERVIEW For personal use only Dollar Percentage INTERIM 2010 INTERIM 2009 movement movement Operating revenue $2,054m $2,419m $(365)m (15%) Normalised earnings* $96m $26m $70m 269% Net profit after tax $56m $24m $32m 133% Adjusted operating cash flow $165m $113m $52m 46% Net cash $1,095m
Slide 22: Normalised Earnings
NORMALISED EARNINGS For personal use only INTERIM 2010 INTERIM 2009 Earnings before Taxation $84m $14m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives $1m $101m Foreign exchange derivatives $11m $(88)m Interest rate derivatives - $(1)m No
Slide 23: Aircraft Delivery Schedule
AIRCRAFT DELIVERY SCHEDULE For personal use only Aircraft Type FY10 FY11 FY12 FY13 FY14 FY15 Boeing 777-300ER - 3 2 - - - Airbus A320 - 2 2 1 3 4 Boeing 787-9 - - - - 5 - 23
Slide 24: Questions
For personal use only 24 QUESTIONS