Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2011 Earnings Presentation
29 slides from Air New Zealand's earnings presentation, Aug 25, 2011
Slide 1: Annual Results 2011
Annual Results For personal use only 2011 Air New Zealand
Slide 2: Highlights
Highlights For personal use only • Normalised earnings* $75m • Net cash position of $860m • Operating cash flow down 5% • Gearing at 46 46.7% 7% • Final dividend 2.5 cents per share (unimputed) • New A320 and B777-300ER aircraft • Seats to Suit • Virgin Alliance and shareholding 2 * Normalised earni
Slide 3: External Environment
External Environment For personal use only • Stronger NZ dollar against US dollar • Average fuel price in FY11 up 28% on FY10 • Refining margin up 134% USD / BBL Fuel NZD / USD NZD:USD S Rate Singapore Jet WTI (Crude) 200 1 180 0.9 160 0.8 140 120 0.7 100 0.6 80 0.5 60 40 0.4 Jan-05 Jul-05 Jan-06 Ju
Slide 4: Key Influences on Profitability
Key Influences on Profitability For personal use only $NZm 600 $61m ($59m) 500 $33m ($229m) $297m 400 300 ($17m) ($24m) ($13m) ($16m) 200 ($95m) $137m 100 $75m 0 June 2010 Passenger Cargo Other Labour Fuel Sales & Operations Depreciation Finance Net Impact June 2011 Normalised Revenue Revenue Revenu
Slide 5: Long Haul Performance
Long Haul Performance For personal use only • Passenger demand* increased 1.2% • Capacity increased 0.3% • Load factor up 0.8 percentage points to 83.9% • Yield improved 4.3% (excluding FX impact, 9.2%) • Christchurch and Japan earthquakes * Measured in revenue passenger kilometres 5
Slide 6: Tasman & Pacific Island Performance
Tasman & Pacific Island Performance For personal use only • Passenger demand up 10.2% • Capacity increased by 6.4% • Load factor up 2.9 percentage points to 83.3% • Virgin Blue trans-Tasman alliance a reality • Seats to Suit a success 6
Slide 7: Seats to Suit a Success
Seats to Suit a Success For personal use only Tasman Passenger Growth* Year on Year November 2010 - May 2011 • Yield dilution less than Passenger Numbers expected 150,000 125,000 • Delivered more capacity at 100,000 minimal costs 75,000 • Load factors increased 50,000 25,000 despite capacity increas
Slide 8: Domestic Performance
Domestic Performance For personal use only • Passenger demand increased by 7.7% • Capacity increased by 3.8% • Load factor up 3.0 percentage points to 82.0% • Within 10 minute OTP performance of 82%* • Ash cloud • New A320s for Domestic • Exit of Pacific Blue *Air New Zealand adheres to a more disci
Slide 9: Impact of Christchurch / Japan Earthquakes
Impact of Christchurch / Japan Earthquakes For personal use only • Combined impact of earthquakes approximately $70m • Combination of reduced demand for travel plus cost of additional capacity into Christchurch and compassionate fares • Domestic market largely recovered • Prolonged recovery for tran
Slide 10: Other Business Areas
Other Business Areas For personal use only • Cargo – Cargo revenue increased 9% – Increased capacity with B773 aircraft – Continued growth in North American southbound routes – Asia and Tasman performing well – Domestic growth in both volume and capacity with A320 introduction • Engineering – Increa
Slide 11: Cost Efficiency
Cost Efficiency For personal use only • Set-back in second half as capacity quickly reduced • Utilisation reduction from Christchurch earthquake • Impact of B747 exit costs and inefficiencies of under utilised fleet 2011 2010 (cents) (cents) Cost per ASK (CASK) 11.34 10.53 Exclude: Fuel (3.33) (2.95
Slide 12: Financial Management
Financial Management For personal use only • $860m cash on balance sheet at year end • Gearing 46.7%, a 0.6 percentage point improvement • Average fleet age of 8.6 years • Moody’s rating Baa3 • Final dividend 2.5 cents per share (unimputed) 12
Slide 13: Airpoints Programme
Airpoints Programme For personal use only • Success of programme measured by engagement • 16% growth in membership base in FY11 • On average, at least one Airpoints member in every NZ ho sehold household • More than 20% of members earned Airpoints through Fly Buys partnership • Planning new function
Slide 14: Potential Bond Offer
Potential Bond Offer For personal use only Air New Zealand is considering making an offer of bonds to the public. Issuer Air New Zealand Limited Securities Unsecured, unsubordinated, fixed rate debt obligations Interest Rate Determined by Air New Zealand Limited in consultation with the Joint Lead M
Slide 15: Aircraft Capital Commitments
Aircraft Capital Commitments For personal use only $NZm Aircraft Capital Commitments 1,000 1. Includes progress payments on aircraft. 800 2. Assumes NZD/USD = 0.83 600 3. Excludes capitalised 400 maintenance of approximately $45m per 200 annum and non aircraft capital commitments. 0 FY12 FY13 FY14 F
Slide 16: Changes to Hedging Policy
Changes to Hedging Policy For personal use only • Fuel and FX hedging aligned; “same speed of adjustment” – 12 month declining wedge – Target 80% hedged for next six months – Increase in fuel hedge timeline – Reduction in FX hedge timeline • Cease capital expenditure hedging • Fuel hedge to be a mix
Slide 17: Current Fuel Hedge Position
Current Fuel Hedge Position* For personal use only • Hedging policy modified due to current market volatility • Decision remains under review • Current position has FY12 first half 89% hedged Volume bbls Ceiling USD Floor USD WTI collars 3.3m $100.84 $88.45 • The second half of FY12 is 30% hedged Vo
Slide 18: Currency Hedging
Currency Hedging For personal use only • 2012 US dollar operating cash flow exposure is approximately 84% hedged at an average NZ$/US$ rate of 0.75 • US$145m of future capital commitments are hedged at NZ$/US$ rate of 0.73 (spot) 18
Slide 19: For personal use only
For personal use only • Following events surrounding Christchurch and the shift of events towards Auckland, the revenue impact is now expected to be around $30m. • Will see activity to stimulate travel and address directional flow 19
Slide 20: Strategic Priorities
Strategic Priorities For personal use only • Long haul review • Virgin Alliance – reinforcing key customer value propositions • Maximising loyalty programme opportunities • Operational productivity and efficiency • Managing fleet replacement programmes • Manage capacity against short haul demand mom
Slide 21: Outlook
Outlook For personal use only • Turbulence and turmoil in international financial markets is concerning. • Seeing good performance in the short haul environment • E Expectt better b tt performance f in i long l haul h lb business i iin FY12 • Accordingly we see an improved result in FY12, contingent
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
Slide 23: Financial Overview
Financial Overview For personal use only Dollar Percentage June 2011 June 2010 movement movement Operating revenue $4,341m $4,046m $295m 7.3% Normalised earnings* earnings $75m $137m ($62m) (45 3%) (45.3%) Net profit after tax $81m $82m ($1m) (1.2%) Operating cash flow $446m $471m ($25m) (5.3%) Net
Slide 24: Normalised Earnings
Normalised Earnings For personal use only June 2011 June 2010 Earnings before Taxation $73m $123m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives $7m $8m Foreign exchange derivatives ($5m) $6m Normalised Earnings before Taxation $75m $137
Slide 25: Group Operating Statistics
Group Operating Statistics For personal use only June 2011 June 2010 Movement* Passengers carried 13.1m 12.3m 6.3% Available seat kilometres (ASKs) 32,353m 31,578m 2.5% Revenue passenger kilometres (RPKs) 26,996m 25,829m 4.5% Load factor 83.4% 81.8% 1.6 pts Yield (cents per RPK) 13.1 12.8 2.0% * Cal
Slide 26: Long Haul Operating Statistics
Long Haul Operating Statistics For personal use only June 2011 June 2010 Movement* Passengers carried 1.7m 1.7m 0.2% ASKs 18,487m 18,430m 0.3% RPKs 15,506m 15,320m 1.2% Load factor 83.9% 83.1% 0.8 pts Yield (cents per RPK) 9.8 9.4 4.3% * Calculations based on numbers before rounding 26
Slide 27: Short Haul Operating Statistics
Short Haul Operating Statistics For personal use only June 2011 June 2010 Movement* Passengers carried 11.4m 10.7m 7.3% ASKs 13,866m 13,147m 5.5% RPKs 11,490m 10,509m 9.3% Load factor 82.9% 79.9% 3.0 pts Yield (cents per RPK) 17.4 17.7 (1.7%) * Calculations based on numbers before rounding 27
Slide 28: Current Operating Fleet
Current Operating Fleet For personal use only Aircraft Type June 2010 June 2011 June 2009 movement 2010 movement 2011 Boeing 747-400 7 - 7 (2) 5 Boeing 777-300ER - - - 3 3 Boeing 777-200ER 777 200ER 8 - 8 - 8 Boeing 767-300ER 5 - 5 - 5 Airbus A320-200 12 - 12 2 14 Boeing 737-300 16 (1) 15 - 15 ATR 7
Slide 29: Questions?
For personal use only Questions? Air New Zealand Annual Results 2011