Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2010 Earnings Presentation
29 slides from Air New Zealand's earnings presentation, Aug 26, 2010
Slide 1: Annual Results 2010
For personal use only Annual Results 2010 first in, best dressed 1 2010 Annual Results
Slide 2: Highlights
Highlights For personal use only • Normalised earnings* $137m • Net cash position of $1.1bn • Operating cashflow up 33% • Gearing at 47.3% • Fully imputed final divided of 4 cents per share • Award winning product and service • New initiatives announced across all markets 2 2010 Annual Results * Nor
Slide 3: Operating environment
Operating environment For personal use only FY10 NZ$ / US$ US$ Foreign Exchange FY09 0.80 • Improving demand environment 0.75 emerging 0.70 0.65 • Yield decline arrested, growth 0.60 apparent in last quarter 0.55 0.50 • Stronger NZ dollar 0.45 jul jan jun nov feb oct mar apr dec may sep aug FY10 Jet
Slide 4: Key influences on profitability
Key influences on profitability For personal use only $NZ (m) 400 26 32 48 443 (10) 300 200 145 137 4 123 100 (250) (14) 0 (100) 39 (269) 10 (200) (81) (300) June 2009 Yield Traffic Freight, (Incl Labour Fuel Price Aircraft Sales and Depreciation Net Finance Net Impact Other June 2010 Hedge June 201
Slide 5: Efficiency gains
Efficiency gains For personal use only • Operating cost* improved 11% • Cost per ASK down 3%* • Employees reduced by 612 or 6% since 2008 • Improved profit margins while reducing scale (m) $NZ Operating cost* (m)ASKs Capacity 4,200 38,000 4,000 36,000 3,800 34,000 3,600 (11%) 32,000 3,400 (8%) 3,200
Slide 6: Revenue management
Revenue management For personal use only 4% 2% 0% jul aug sep oct nov dec jan feb mar apr may jun (2%) (4%) (6%) (8%) (10%) (12%) 3 Month Rolling Average RASK* Change YTD RASK* Change (14%) YTD Yield Change (FX Adj) (16%) YTD Yield Change 6 2010 Annual Results * Passenger revenue per available seat
Slide 7: Long haul performance
Long haul performance For personal use only • Passenger demand* down 6.8% • Capacity reduced by 8.5% • Load factor up 1.5 percentage points to 83.1% • Yield down 10.7% • Challenging market conditions • Icelandic volcano and H1N1 flu impacts minimised • Signs of demand growth 7 2010 Annual Results *
Slide 8: Long haul revenue management
Long haul revenue management For personal use only 0% jul aug sep oct nov dec jan feb mar apr may jun (2%) (4%) (6%) (8%) (10%) (12%) (14%) (16%) 3 Month Rolling Average RASK* Change (18%) YTD RASK* Change (20%) YTD Yield Change 8 2010 Annual Results * Passenger revenue per available seat kilometre
Slide 9: Domestic performance
Domestic performance For personal use only • Passenger demand increased by 4.1% • Capacity reduced by 1.2% • Load factor up 4.0 percentage points to 79.0% • Regional airfares down 5.8% • 10 minute OTP performance of 87%* • Queenstown and Wanaka capacity added • Jet capacity to progressively increase
Slide 10: Tasman & Pacific Island performance
Tasman & Pacific Island performance For personal use only • Passenger demand down 4.5% • Capacity reduced by 10.2% • Load factor up 4.8 percentage points to 80.4% • Virgin Blue trans-Tasman alliance proposal • New Tasman and Pacific Islands product on sale • New check-in kiosks for trans-Tasman pass
Slide 11: Short haul revenue management
Short haul revenue management For personal use only 6% 4% 2% 0% jul aug sep oct nov dec jan feb mar apr may jun (2%) (4%) (6%) (8%) (10%) 3 Month Rolling Average RASK* Change (12%) YTD RASK* Change (14%) YTD Yield Change 11 2010 Annual Results * Passenger revenue per available seat kilometre
Slide 12: Implementing new initiatives
Implementing new initiatives For personal use only • World-first long haul product • Tasman and Pacific Island product choices • Common narrowbody A320 fleet • Loyalty programme developments • Starfish regional discount card 12 2010 Annual Results
Slide 13: Trans-Tasman alliance proposal
Trans – Tasman alliance proposal For personal use only • Revenue allocation agreement and code share • Improved Australian distribution and product offering • Lounge access and frequent flyers • Accelerated market growth and tourism promotion • Regulatory decision expected before the end of the year
Slide 14: Other business areas
Other business areas For personal use only • Cargo – Cargo volumes increasing – Demand is promising particularly in China and Australia • Engineering – Third party volume growth – Well prepared for new aircraft arrivals – Altitude wins first Boeing Business Jet contract 14 2010 Annual Results
Slide 15: Financial management
Financial management For personal use only • $1.1bn cash on balance sheet at year end • Gearing 47.3%, 2.3 percentage point increase • Average fleet age of 8.3 years • Moody’s rating – Ba1 stable • Fully imputed final dividend of 4 cents per share 15 2010 Annual Results
Slide 16: Airpoints programme
Airpoints programme For personal use only • Expanded range of credit card partners • Fly Buys partnership announced last week • Increases customers’ ability to earn • Now leverage these expanded partnerships 16 2010 Annual Results
Slide 17: Aircraft capital commitments
Aircraft capital commitments For personal use only $NZm 700 600 Aircraft delivery FY14 FY12 FY13 FY15 FY11 500 schedule 400 Boeing 777-300ER 3* 2 - - - 300 Airbus A320 2* 2* 1 3 4 200 Boeing 787-9 - - - 5 - 100 0 FY10 FY11 FY12 FY13 1. Assumes NZD/USD = 0.70 2. Includes progress payments on aircraft
Slide 18: Fuel hedging
Fuel hedging* For personal use only • The first half of FY11 is 89% hedged Volume bbls Ceiling $us Floor $us Singapore Jet collars 1.6m $90.70 $80.11 WTI collars 1.7m $81.32 $70.98 • The second half of FY11 is 48% hedged Volume bbls Ceiling $us Floor $us WTI collars 1.7m $80.23 $70.69 18 2010 Annual
Slide 19: Currency hedging
Currency hedging For personal use only • 2011 US dollar operating cash flow exposure is approx. 88% hedged at an average NZ$/US$ rate of 0.65 • US$373m of future capex commitments are hedged at NZ$/US$ rate of 0.73 (spot) 19 2010 Annual Results
Slide 20: Strategic priorities
Strategic priorities For personal use only • Increasing capacity as growth returns • Promotion and delivery of new long haul product • Managing fleet replacement programmes • Maintaining our environmental leadership position • Implementing alliance upon regulatory approval • Increasing customer enga
Slide 21: Outlook
Outlook For personal use only • The airline industry is showing signs of recovery with both demand and yields continuing to improve. • The airline is planning to increase capacity in 2011 across the network, particularly on domestic and trans-Tasman services • Earnings can be significantly impacted
Slide 22: Supplementary information
Supplementary information For personal use only • Financial overview • Normalised earnings • Group operating statistics • Long haul operating statistics • Short haul operating statistics • Current operating fleet 22 2010 Annual Results
Slide 23: Financial overview
Financial overview For personal use only Dollar Percentage 2010 2009 movement movement Operating revenue $4,046m $4,609m $(563)m (12%) Normalised earnings* $137m $145m $(8)m (6%) Net profit after tax $82m $21m $61m 290% Adjusted operating cash flow $471m $355m $116m 33% Net cash $1,067m $1,573m $(50
Slide 24: Normalised earnings
Normalised earnings For personal use only 2010 2009 Earnings before Taxation $123m $7m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives $8m $130m Foreign exchange derivatives $6m $9m Interest rate derivatives - $(1)m Normalised Earnings be
Slide 25: Group operating statistics
Group operating statistics For personal use only 2010 2009 Movement* Passengers carried 12.3m 12.4m (0.4%) Available seat kilometres (ASKs) 31,578m 34,316m (8.0%) Revenue passenger kilometres (RPKs) 25,829m 27,112m (4.7%) Load factor 81.8% 79.0% 2.8 pts Yield (cents per RPK) 12.8 13.8 (7.1%) 25 2010
Slide 26: Long haul operating statistics
Long haul operating statistics For personal use only 2010 2009 Movement* Passengers carried 1.7m 1.8m (6.9%) ASKs 18,430m 20,150m (8.5%) RPKs 15,320m 16,432m (6.8%) Load factor 83.1% 81.6% 1.5 pts Yield (cents per RPK) 9.4 10.6 (10.7%) 26 2010 Annual Results * Calculations based on numbers before ro
Slide 27: Short haul operating statistics
Short haul operating statistics For personal use only 2010 2009 Movement* Passengers carried 10.7m 10.6m 0.7% ASKs 13,147m 14,166m (7.2%) RPKs 10,509m 10,680m (1.6%) Load factor 79.9% 75.4% 4.5 pts Yield (cents per RPK) 17.7 18.7 (5.4%) 27 2010 Annual Results * Calculations based on numbers before r
Slide 28: Current operating fleet
Current operating fleet For personal use only Aircraft Type June 2009 June 2010 June 2008 movement 2009 movement 2010 Boeing 747-400 8 (1) 7 - 7 Boeing 777-200ER 8 - 8 - 8 Boeing 767-300ER 5 - 5 - 5 Airbus A320-200 12 - 12 - 12 Boeing 737-300 16 - 16 (1) 15 ATR 72-500 11 - 11 - 11 Bombardier Q300 21
Slide 29: Questions
For personal use only Questions 29 2010 Annual Results