Air New Zealand Limited · NZX:AIR
Air New Zealand — H1 FY2011 Earnings Presentation
27 slides from Air New Zealand's earnings presentation, Feb 24, 2011
Slide 1: Interim Results
fae AIR NEW ZEALAND Interim Results Interm 3011
Slide 2: Highlights
Highlights For personal use only • Normalised earnings $112m*, up 17% (including $18 million gain on equity swaps) • Net cash position of $940m • Gearing improved by 4.5%, at 42.8% • Credit Rating upgraded to Baa3, Investment Grade • New Long Haul B777-300ER product a reality * Normalised earnings b
Slide 3: External Environment
External Environment For personal use only • Sharp volatility in fuel price over the last three months • NZ$ stronger against the US$ • Competition is intensifying Fuel ue Price ce Jet Fuel $US Foreign Exchange Crude Oil 0.85 120 110 0.80 100 $US / BBL 0.75 $NZ / $US 90 0.70 80 70 0.65 60 0.60 Oct 0
Slide 4: Key Influences on Profitability
Key Influences on Profitability For personal use only $NZ (m) 400 34 127 300 (30) 20 18 200 77 (12) (106) (12) 112 3 115 96 100 (97) (3) 0 Dec 2009 Passenger Passenger Cargo, Labour Fuel Price Maintenance Aircraft Sales and Gain on Net impact of Other Dec 2010 Hedge Dec 2010 Normalised Yield Traffic
Slide 5: Capacity Growth
Capacity Growth For personal use only • Capacity increased, however remains below the peak of 2008 19,000 15% 18,000 10% 17,000 Capacity ASKs (000s) 5% 16,000 ASKs 0% 15,000 % Change vs prior -5% half 14,000 -10% 13,000 12,000 -15% 1H 06 2H 06 1H 07 2H 07 1H 08 2H 08 1H 09 2H 09 1H 10 2H 10 1H 11 5
Slide 6: Revenue Management
Revenue Management For personal use only • Yields impacted by stronger NZ dollar 12% YTD RASK* Change YTD Yield Change 10% YTD Yield Change (FX Adj) 8% 6% 4% 2% 0% Jul Aug Sep Oct Nov Dec * Passenger Revenue per Available Seat Kilometre 6
Slide 7: Long Haul Performance
Long Haul Performance For personal use only • Passenger demand up 3.6% • Capacity up 2.1% • Load factor improved 1.3 percentage points to 84.6% • Yield up p 7.2% % ((13.0% %pprior to foreign g exchange) g ) • Recovery from impacts of global recession • Capacity on Asian routes back after H1N1 7
Slide 8: Long Haul Revenue Management
Long Haul Revenue Management For personal use only • Yields continue to outperform compared to last year YTD RASK* Change YTD Yield Change 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Jul Aug Sep Oct Nov Dec * Passenger Revenue per Available Seat Kilometre 8
Slide 9: Tasman & Pacific Island Performance
Tasman & Pacific Island Performance For personal use only • Demand up 9.7% • Capacity up 4.1% • Load factor improved 4.3 percentage points to 84.6% • Seats to Suit p product began g operating p g in November • Bookings up 15% 9
Slide 10: Domestic performance
Domestic performance For personal use only • Demand up 9.3% on 2.7% increase in capacity • Load factor improved 4.9 percentage points to 82.1% • Changing competitive dynamics • A320s on order in move to a single g narrow body y fleet – First A320 has arrived with onboard connectivity • OTP strong at
Slide 11: Short Haul Revenue Management
Short Haul Revenue Management For personal use only • Reduced yield has stimulated demand YTD RASK* Change YTD Yield Change 7% 6% 5% 4% 3% 2% 1% 0% (1%) Jul Aug Sep Oct Nov Dec (2%) * Passenger Revenue per Available Seat Kilometre 11
Slide 12: Other Businesses
Other Businesses For personal use only • Demand and yield recovery in cargo business • Investment in Engineering facilities focused on improving productivity – Third party Engineering revenue continues to develop • Developed new loyalty relationships – Suite of financial partners fully developed – F
Slide 13: Cost Efficiency
Cost Efficiency For personal use only • Continuous cost management • New B777-300 and A320 aircraft will deliver improved operating efficiencies • CASK excluding fuel, foreign exchange hedges and gain on equity swaps improved by 00.7% 7% Interim 2011 Interim 2010 Cost per ASK (CASK) 10.91 10.12 Excl
Slide 14: Strategic Priorities
Strategic Priorities For personal use only • Implementation of Virgin Alliance • Leverage and develop international partnership opportunities – Star Alliance, Virgin Atlantic, Etihad • Manage fleet replacement programmes • Ensure success of Rugby Festival opportunity – Operationally perform and maxi
Slide 15: Financial Management
Financial Management For personal use only • $940m cash, down $127m on June 2010 – Capital investments – Operating cashflow up 27% • Gearing 42.8%, an improvement of 4.5% since June 2010 • Average fleet age of 8.4 years • Interim dividend of 3.0 cents per share 15
Slide 16: Aircraft Capital Commitments
Aircraft Capital Commitments For personal use only 700 FY12 FY13 FY14 FY15 FY11 600 Aircraft delivery schedule 500 Boeing 777-300ER 3* 2 - - - 400 Airbus A320 2* 2* 1 3 4 300 Boeing 787-9 - - - 5 - 200 100 0 FY11 FY12 FY13 • Assumes NZD/USD = 0.75 * The third Boeing 777-300ER aircraft and the first
Slide 17: Fuel Hedging
Fuel Hedging For personal use only • The second half of FY11 is 93% hedged Volume bbls Ceiling $US Floor $US Singapore Jet collars 1.2m $95.46 $85.94 WTI collars 2.1m $83.28 $73.95 • The first half of FY12 is 42% hedged Volume bbls Ceiling $US Floor $US WTI collars 1.6m $90.32 $80.52 * Fuel hedge po
Slide 18: Currency Hedging
Currency Hedging For personal use only • Operating cash flow exposure for the second half of FY11 is 83% hedged at an average NZ$/US$ rate of 0.70 – Based on 75 cent exchange rate the hedge losses for the second half of FY11 will be $38m in addition to the $75m losses realised in the first half • Th
Slide 19: Christchurch Earthquake
Christchurch Earthquake For personal use only • Immediate focus on supporting those impacted by the earthquake • No material damage to our owned facilities in Christchurch • No assessment has been made of the commercial impact 19
Slide 20: Outlook
Outlook For personal use only • Implemented new initiatives across the business setting a strong platform for the long term future • Fuel price volatility remains a significant risk to the year end result • A key management focus will be assisting with the recovery from the devastating Christchurch
Slide 21: For personal use only
For personal use only 21
Slide 22: Financial Overview
Financial Overview For personal use only Interim 2011 Interim 2010 Movement Movement Operating revenue $2,236m $2,054m $182m 9% Normalised earnings* $112m $96m $16m 17% Net profit after tax $98m $56m $42m 75% Adjusted operating cash flow $210m $165m $45m 27% Net cash $940m $1,095m $(155)m (14%) Gear
Slide 23: Normalised Earnings
Normalised Earnings For personal use only Interim 2011 Interim 2010 Earnings before Taxation $115m $84m R Reverse nett ((gains) i ) / llosses on d derivatives i ti th thatt h hedge d exposures iin other th fifinancial i l periods: i d Fuel derivatives $(2)m $1m Foreign exchange derivatives $(1)m $11
Slide 24: Group Operating Statistics
Group Operating Statistics For personal use only Interim 2011 Interim 2010 Movement* Passengers carried 6.8m 6.3m 7.8% Available seat kilometres (ASKs) 16,804m 16,359m 2.7% Revenue passenger kilometres (RPKs) 14,149m 13,343m 6.0% Load factor 84.2% 81.6% 2.6 pts Yield (cents per RPK) 13.0% 12.6% 3.0%
Slide 25: Long Haul Operating Statistics
Long Haul Operating Statistics For personal use only Interim 2011 Interim 2010 Movement* Passengers carried 0.88m 0.85m 2.9% ASKs 9,674m 9,478m 2.1% RPKs 8,182m 7,895m 3.6% Load factor 84.6% 83.3% 1.3 pts Yield (cents per RPK) 9.7 9.1 7.2% * Calculations based on numbers before rounding 25
Slide 26: Short Haul Operating Statistics
Short Haul Operating Statistics For personal use only Interim 2011 Interim 2010 Movement* Passengers carried 5.9m 5.5m 8.6% ASKs 7,130m 6,881m 3.6% RPKs 5,967m 5,448m 9.5% Load factor 83.7% 79.2% 4.5 pts Yield (cents per RPK) 17.4 17.6 (1.5%) * Calculations based on numbers before rounding 26
Slide 27: For personal use only
For personal use only 27