Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 2016 Earnings Presentation
33 slides from Air New Zealand's earnings presentation, Feb 25, 2016
Slide 1: Air New Zealand
—_ FOr peisOnel USe"On|\y rad AIR NEW ZEALAND \o_
Slide 2: Forward looking statements
Forward looking statements For personal use only This presentation contains forward-looking statements. Forward-looking statements often include words such as “anticipate", "expect", "intend", "plan", "believe“ , “continue” or similar words in connection with discussions of future operating or finan
Slide 3: Business Review & Strategic Update
For personal use only Business Review & Strategic Update Christopher Luxon CEO
Slide 4: Interim Highlights
Interim Highlights For personal use only • Operating revenue $2.7 billion, (up 12%) • Earnings before taxation $457 million, (up 132%) • Net profit after taxation $338 million, (up 154%) • Operating cash flow $541 million, (up 43%) Earnings before Taxation 457 ($ million) 277 198 197 141 160 114 54
Slide 5: Key drivers in our result
Key drivers in our result For personal use only • Demand exceeded record capacity growth – ASKs and RPKs up 16% and 17%, respectively • Passenger revenue up 16%, supplemented by robust cargo revenue, up 21% • Lower fuel price more than offset increased fuel volume • Economies of scale and business s
Slide 6: External dynamics support continued demand growth
External dynamics support continued demand growth For personal use only Tailwinds Headwinds • Growth in overseas tourism (+10%*) International • Increased long-haul competition driven by: – Strong tourism Long-haul • Strong USD makes New Zealand a – Low fuel price relatively cheaper destination • St
Slide 7: Significant progress on strategic priorities
Significant progress on strategic priorities For personal use only OUR STRATEGIC PRIORITIES 1H16 highlights Houston, Buenos Aires routes Grow and develop markets Realign our business for growth commenced MARKETS Grow contribution from alliance partners Initiation of revenue share alliance with A
Slide 8: Strategic priority: markets
Strategic priority: markets For personal use only Grow & develop markets and contribution from partners 1H 2016 Progress Looking forward… • International long-haul capacity growth in 1H • 2H 2016 total capacity growth ~7% 2016 of 24% • Increased utilisation from Domestic network • Successfully launc
Slide 9: Strategic priority: efficiency
Strategic priority: efficiency For personal use only Grow and simplify the fleet 1H 2016 Progress Looking forward… • Investment in modern, fuel efficient aircraft • World-class modern fleet provides – Delivery of 3 B787-9s and 2 Domestic A320s significant cost advantages – 13 A321/320 NEOs on order
Slide 10: Strategic priority: customer
Strategic priority: customer For personal use only Grow a consistent and personalised customer experience 1H 2016 Progress Looking forward… • Recognised as “Airline of the Year” for the • Lounge upgrades in Brisbane, Hamilton, third consecutive year by airlineratings.com Invercargill and Wellington
Slide 11: Strategic priority: people
Strategic priority: people For personal use only Grow high performance culture and capability 1H 2016 Progress Looking forward… • Continued to attract top-tier talent • Jodie King appointed new Chief People Officer • Staff turnover remained at low levels (< 5%) • Continue to build upon relationships
Slide 12: Strategic priority: digital
Strategic priority: digital For personal use only Unleash digital transformation 1H 2016 Progress Looking forward… • Appointment of Avi Golan as Chief Digital • Core focus of Digital team will be using Officer technology to benefit our customers • Completed reorganisation of digital team • Reduce th
Slide 13: Financial Review
For personal use only Financial Review Rob McDonald CFO
Slide 14: Changes in profitability
Changes in profitability For personal use only 14
Slide 15: Reduction in CASK delivers $227m of value
Reduction in CASK* delivers $227m of value For personal use only • CASK related to ongoing operations improved 11% • Average MOPS price decreased 44% from the prior period (from US$107/bbl to US$60/bbl) • Efficiencies from growth, fleet simplification and other cost saving initiatives drove $106 mil
Slide 16: CASK improvement
CASK improvement For personal use only • Improvements to cost structure driven by fleet CASK* 10.25 simplification benefits • Over 3 years, CASK* improved 7% (excluding 10.00 the benefit of fuel price movements) as a result of economies of scale and efficiencies 9.75 9.50 9.25 9.00 DEC 2012 DEC 2013
Slide 17: Domestic
Domestic For personal use only • Capacity growth of 11% • Strong performance with demand closely tracking capacity • Comprehensive domestic & regional network with over 400 flights daily serving 22 destinations across New Zealand • On time performance (OTP) was world class at 91.1% for domestic jet
Slide 18: Tasman & Pacific Islands
Tasman & Pacific Islands For personal use only • Capacity growth of 7% • Increased frequency of wide-body aircraft • Introduction of Premium Economy on select routes commenced in October with solid demand • International short-haul on time performance (OTP) 87.1% for the 6 months to December 2015 De
Slide 19: International
International For personal use only • Capacity growth of 24% • Commenced new routes to Buenos Aires and Houston in December 2015 • Announced new Ho Chi Minh City seasonal service beginning June 2016 • International long-haul on time performance (OTP) 78.8% for the 6 months to December 2015 Dec 2015
Slide 20: Cargo
Cargo For personal use only • Robust revenue growth driven by strong volumes and improved yields • Capacity increases and new routes allowed for increased volume • Growth particularly strong on Pacific long-haul and into Singapore Volume up 9% Revenue Yield up 21% up 1.6% Foreign Exchange up 10% 20
Slide 21: Strong operating cash flow and balance sheet provide flexibility
Strong operating cash flow and balance sheet provide flexibility For personal use only Operating cash flow ($m) 722 • Net cash on hand of $1.4 billion, up 6% from 30 June 2015 541 407 430 • Operating cash flow $541 million, up 43% over prior period 378 326 343 300 146 2H 1H • Gearing moved to 53.8%,
Slide 22: Aircraft capital expenditure
Aircraft capital expenditure For personal use only Aircraft capital expenditure 1,000 • Expected investment of ~$2.3 billion in aircraft 800 and associated assets over the next 3.5 years 600 $ millions • Assumes NZD/USD = 0.65 400 • Includes progress payments on aircraft 200 0 2016 2017 2018 2019 Fl
Slide 23: Hedging
Hedging For personal use only Fuel hedging* Fuel hedges* 1,750,000 • Average decline of jet fuel price per $60 1,500,000 barrel of 44% during the period 1,250,000 Volume (bbls) $50 – 1H 2016 MOPS price of US$60 compared 1,000,000 US$ to US$107 in 1H 2015 750,000 $40 – Participated in 82% of availabl
Slide 24: Outlook
For personal use only Outlook Christopher Luxon CEO
Slide 25: Outlook
Outlook For personal use only • External factors that can influence outlook for second half of the year include fuel prices, foreign currency rates and competition • Based upon current market conditions and assuming current fuel prices and foreign exchange rates, we are targeting earnings before tax
Slide 26: Capacity Outlook
Capacity Outlook For personal use only 2H 2016 2017 (preliminary) ~+7% +8% to 10% total capacity total capacity Short-haul: ~+5% Short-haul: ~+6 to 8% Long-haul: ~+9% Long-haul: ~+8 to 10% 26
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 Dec 2015 Dec 2014 Movement Movement $M $M $M % Operating revenue 2,698 2,403 295 12% Earnings before taxation 457 197 260 132% Net profit after taxation 338 133 205 154% Operating cash flow 541 378 163 43% Net cash position* 1,400 1,321 79 6% Gearing* 53.8% 5
Slide 30: Group performance metrics
Group performance metrics For personal use only Dec 2015 Dec 2014 Movement* Passengers carried (‘000s) 7,757 7,044 10.1% Available seat kilometres (ASKs, millions) 19,985 17,160 16.5% Revenue passenger kilometres (RPKs, millions) 16,864 14,399 17.1% Load factor 84.4% 83.9% 0.5 pts Yield (cents per R
Slide 31: Projected aircraft in service
Projected aircraft in service For personal use only • 5 ATR 72-600 aircraft expected to be delivered in the next 6 to 9 months • Beech 1900Ds exiting by September 2016; Boeing 767-300ERs exiting by calendar 2017 Aircraft fleet age in years (seat weighted) 2016 2017 2018 2019 9.2 9.1 Boeing 777-300ER
Slide 32: Fuel hedging
Fuel hedging* For personal use only Volume Ceiling Floor (bbls) (USD) (USD) 2H 2016 Brent collars 2,917,500 50.68 36.46 1H 2017 Brent collars 2,537,500 41.07 26.05 2H 2017 Brent collars 200,000 42.13 27.13 * Fuel hedging as at 16 February 2016. 32
Slide 33: Air New Zealand
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