Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2012 Earnings Presentation
26 slides from Air New Zealand's earnings presentation, Aug 30, 2012
Slide 1: Air New Zealand 2012 Annual Results
Air New Zealand For personal use only 2012 Annual Results
Slide 2: Highlights
Highlights For personal use only • Normalised earnings* before tax of $91m, $ up 21% • Net profit after tax of $71m $71m, down 12% • Significantly stronger second half performance • Strong liquidity; net cash position over $1 billion • Gearing improved to 46.1% • Final dividend of 3.5 3 5 cents per
Slide 3: Key Drivers of Result
Key Drivers of Result For personal use only • Operating revenue up 3.3% – Long haul: Growth offset by weak Europe and Japan – Tasman: Growth from Seats to Suit and Virgin Alliance – Domestic: Capacity and yield increases partially offset by reduced business travel during RWC and General Election – C
Slide 4: Changes in Profitability
Changes in Profitability For personal use only NZ$m 400 350 300 $50m ($18m) ($248m) 250 $168m 200 $121m ($21m) 150 ($36m) 100 $91m $94m $ $75m 50 0 June 2011 Passenger Other Labour Fuel Net FX Impact Aircraft Depreciation, June 2012 June 2012 Normalised Revenue Revenue Operations, Lease & Normalised
Slide 5: Building on Domestic Strength
Building on Domestic Strength For personal use only • Increased demand combined with strengthening yield • Improving operating efficiencies with new aircraft – Larger A320s replacing B737s • New fare structure and Grabaseat stimulating g demand • Independent review confirms New Zealand has better re
Slide 6: Continuing Tasman & Pacific Island Success
Continuing Tasman & Pacific Island Success For personal use only • Seats to Suit and Virgin Alliance driving growth • Seats to Suit success from offering value proposition across diverse market • Virgin Alliance provides customers with a comprehensive Australasian network and seamless travel • Capac
Slide 7: Long Haul Re-Engineering Underway
Long Haul Re-Engineering For personal use only Underway • Revenue up 2%; yield up 4% (7.5% adjusted for FX) • Refocused sales and marketing strategy • Redeployment of capacity improving efficiencies • Exit Beijing j g to focus on Shanghai. g Daily y by y early y 2013 • B773 aircraft replaced B747s,
Slide 8: Profit Improvement Initiatives Increase to $250m
Profit Improvement Initiatives Increase to $250m For personal use only Total By Overhead Costs $60m FY13 Ancillary Revenue $40m FY14 Network $60m FY14 Fleet $35m FY15 S Supply l Ch Chain i & Other Oth Direct Di t Costs C t $55 $55m FY15 TOTAL $250m 8
Slide 9: Loyalty and Ancillary Revenue
Loyalty and Ancillary Revenue For personal use only • Focus on ancillary revenue • Skycouch proving popular • OneUp p upgrade pg p product successfully y launched July y • Airpoints membership up 19% in the year to 1.2 million; 43% higher than 3 years ago • Strong launch of OneSmart card product – t
Slide 10: Investment in Virgin Australia
Investment in Virgin For personal use only Australia • Equity investment increased from 14.99% to 19 99% 19.99% • Total investment carried at $220m* $ • Investment not equity accounted • Value of investment represents 24 cents of value per Air NZ share** *as at 30 June 2012 **as at 28 August 2012 10
Slide 11: Financial Management
Financial Management For personal use only • Net cash improved 19% to over $1 billion • Gearing improved 0.6 percentage points to 46.1% • Average fleet age of 8.6 years • Moody Moody’s s rating held at Baa3 • $150m bond issue fully subscribed • Final dividend of 3.5 cents per share (unimputed) 11
Slide 12: Key Strategic Priorities
Key Strategic Priorities For personal use only • Continued development and investment in strong D Domestic ti network t k • Develop Virgin Australia Partnership • Re-engineer International network performance • Maximise growth opportunities from partnerships • Develop loyalty business opportunities
Slide 13: Earnings Momentum
Earnings Momentum For personal use only • Stronger second half earnings • Earnings trend positioning for future growth • Leaving currency losses behind • Full impact of B773 replacing B747 to be felt • Redeployment of aircraft improving long haul efficiencyy and competitiveness p • Expect to more th
Slide 14: Supplementary Information
S Supplementary l t I f Information ti For personal use only • Financial overview • Normalised earnings • Cost efficiency • Aircraft capital commitments • Current hedgeg p positions • Labour efficiency • Key external inputs • Group operating statistics • Current operating fleet 14
Slide 15: Financial Overview
Financial Overview For personal use only Dollar Percentage June 2012 June 2011 movement movement Operating revenue $4,483m $4,341m $142m 3.3% Normalised earnings* $91m $75m $16m 21.3% Net profit after tax $71m $81m ($10m) (12.3%) Operating cash flow $455m $446m $9m 2.0% Net cash position $1,027m $86
Slide 16: Normalised Earnings
Normalised Earnings Earnings* For personal use only June 2012 June 2011 E Earnings i before b f Taxation T ti (per ( NZ IFRS) $94 $94m $73 $73m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives ($11m) $7m Foreign exchange derivatives $8m ($
Slide 17: Cost efficiency
Cost efficiency For personal use only 2012 2011 ((cents)) ((cents)) Cost per ASK (CASK) 11.57 11.34 E l d Exclude: Fuel (3.77) (3.33) FX hedges (0.19) (0.36) CASK ((excl. Fuel and FX hedges) g ) 7.61 7.65 17
Slide 18: Aircraft Capital Commitments
Aircraft Capital Commitments For personal use only NZ$ m 800 700 1. Includes progress payments on 600 aircraft aircraft. 500 2. Assumes NZD/USD = 0.81 400 3. Excludes capitalised maintenance 300 of approximately $60m per 200 annum and non aircraft capital 100 commitments. 0 FY13 FY14 FY15 FY16 Aircr
Slide 19: Current Hedge Positions
Current Hedge Positions For personal use only Fuel F el • The first half of FY13 is 76% hedged • The Th second d half h lf off FY13 iis 13% h hedged d d Volume bbls Ceiling USD Floor USD FY13 H1 Brent Calls 562,500 $113.00 - WTI Collars 170,000 $106.40 $82.26 WTI Calls* C ll * 2 132 500 2,132,500 $1
Slide 20: Labour Efficiency
Labour Efficiency For personal use only • Cost review initiatives beginning to take effect NZ$ '000s 470 420 Revenue / 370 Employee 320 Cost (excl. Fuel) / 270 Employee 220 2008 2009 2010 2011 2012 20
Slide 21: Key External Inputs
Key External Inputs For personal use only • NZ dollar remained strong against trading currencies • Fuel prices remain escalated Fuel NZD/USD NZD:USD Rate USD / BBL Singapore Jet WTI (Crude) 200 1.00 180 0.90 160 0.80 140 120 0.70 100 0 60 0.60 80 0.50 60 40 0.40 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Ju
Slide 22: Group Operating Statistics
Group Operating Statistics For personal use only June 2012 June 2011 Movement* Movement Passengers carried (‘000s) 13,122 13,103 0.1% Available seat kilometres (ASKs) 32,618m 32,353m 0.8% Revenue passenger kilometres (RPKs) 27,013m 26,996m 0.1% Load factor 82.8% 83.4% (0.6 pts) Yield (cents per RPK)
Slide 23: Domestic Performance
Domestic Performance For personal use only June 2012 June 2011 Movement* Movement Passengers carried (‘000s) 8,500 8,530 (0.3%) A il bl seatt kil Available kilometres t (ASK (ASKs)) 4 969 4,969m 4 904 4,904m 1 3% 1.3% Revenue passenger kilometres (RPKs) 4,050m 4,021m 0.7% Load factor 81.5% 82.0% (0.
Slide 24: Tasman & Pacific Island Performance
Tasman & Pacific Island For personal use only Performance June 2012 June 2011 Movement* Movement Passengers carried (‘000s) 3,020 2,919 3.5% A il bl seatt kil Available kilometres t (ASK (ASKs)) 9 278 9,278m 8 962 8,962m 3 5% 3.5% Revenue passenger kilometres (RPKs) 7,795m 7,470m 4.4% Load factor 84
Slide 25: Long Haul Performance
Long Haul Performance For personal use only June 2012 June 2011 Movement* Movement Passengers carried (‘000s) 1,602 1,654 (3.2%) A il bl seatt kil Available kilometres t (ASK (ASKs)) 18 371 18,371m 18 487 18,487m (0 6%) (0.6%) Revenue passenger kilometres (RPKs) 15,168m 15,506m (2.2%) Load factor 82
Slide 26: Current Operating Fleet
Current Operating Fleet For personal use only Aircraft Type June 2012 June 2011 Movement 2012 Boeing 747-400 5 (3) 2 Boeing 777-300ER 3 2 5 Boeing g 777-200ER 8 - 8 Boeing 767-300ER 5 - 5 Airbus A320-200 14 3 17 B i 737 Boeing 737-300 300 15 (2) 13 ATR 72-500 11 - 11 Bombardier Q300 23 - 23 Beech 19