Air New Zealand Limited · NZX:AIR
Air New Zealand — Non-Deal Roadshow (October 2016)
36 slides from Air New Zealand's roadshow presentation, Oct 20, 2016
Slide 1: Investor Presentation: London Investor Roadshow
For personal use only Investor Presentation London Investor Roadshow 20 October 2016 1
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: Highlights
For personal use only Highlights 3
Slide 4: Air New Zealand at a glance
Air New Zealand at a glance 76 Pacific Rim For personal use only Years in operation Focused network driven by alliance partnerships 30 21 International Domestic destinations destinations 15 million 11,500 Passengers carried Air New Zealand annually employees based globally 11 Baa2 Consecutive years
Slide 5: Exchanges and ownership structure
Exchanges and ownership structure For personal use only Share register (as at 30 June 2016) AIR AIZ NXZ stock ticker ASX stock ticker Retail investors 4% • Dual-listed on the NZX and ASX stock exchanges • Strong trading liquidity: ~2.1 million average daily trading volume • Member of the NZX50 index
Slide 6: 2016 network and key financial metrics
2016 network and key financial metrics For personal use only $5.2b operating revenue $806m * 2016 ASK growth earnings before taxation +12% $1.1b Driven by new international routes & fleet up-gauge operating cash flow 22% * Pre-tax ROIC * Before other significant items of $143 million. See appendix f
Slide 7: Profitability and dividends through the cycle
Profitability and dividends through the cycle For personal use only 13 consecutive years of positive earnings… …and 11 years of consecutive dividends Net profit after tax Dividends declared ($ millions) (cents per share) 50.0 $500 463 45.0 Ordinary dividend 40.0 $400 Special dividend 327 $300 263 30
Slide 8: Market environment
For personal use only Market environment
Slide 9: Demand drivers remain robust
Demand drivers remain robust For personal use only Tourism to New Zealand Domestic tourism and travel New Zealand economy growing double-digits demand strong remains healthy Largest inbound markets are Australia, Stable economic conditions and Average GDP growth of 2.5% in 2015** China and the
Slide 10: Market environment
Market environment For personal use only Strong inbound tourism growth Current view of stable fuel prices Increased competitive landscape 10
Slide 11: Competitive advantages
For personal use only Competitive advantages
Slide 12: A simple and proven strategy for success
A simple and proven strategy for success For personal use only 1. Our alliance-driven 2. Our brand and Kiwi 3. Our domestic 4. Our AirpointsTM 5. Our simplified fleet & Pacific Rim network service culture network members competitive cost structure 12
Slide 13: Our alliance-driven Pacific Rim network
1. Our alliance-driven Pacific Rim network Strong JV partnerships de-risk international growth Why revenue share alliances? For personal use only Partners have “skin in the game” to sell the route Strength of sales & distribution in local markets Access to frequent flyer databases Strong partn
Slide 14: Our brand and Kiwi service culture
2. Our brand and Kiwi service culture Experiencing record high customer satisfaction, brand health & employee engagement For personal use only Record 69% Customer satisfaction Employee engagement #1 #6 Corporate reputation Corporate reputation in Brand Health in in New Zealand Australia Great Shape
Slide 15: Our domestic network
3. Our domestic network Strong market share to leverage growth from inbound tourism For personal use only • The heartland of Māori culture • Unmatched network offering to 21 main centres and regions across New Zealand • Domestic dispersal of inbound international tourism through Auckland • Network s
Slide 16: Our Airpoints members
4. Our AirpointsTM members Our platform for loyalty and customer relationship data For personal use only Since launching in 1989, the Members are based in more than AirpointsTM programme now has 160 different countries over 2.2 million members In 2016, members have enjoyed More than 50 New Zealand r
Slide 17: Our simplified fleet
5. Our simplified fleet More than halfway through significant capex programme For personal use only Historical & projected aircraft capex* Impact of fleet programme 2012 2018 Aircraft types $1,000 ~$2.1b** Many 2017-2021 Few projected aircraft Wide-body $800 Turboprops capex B747 ATR72s Wide-body Tu
Slide 18: Our competitive cost structure
5. Our competitive cost structure Simplified and modern fleet driving improved variable cost efficiencies For personal use only Wide-body Narrow-body Turbo-prop B787-9 A321 neo ATR72-600 vs B767-300ER vs A320 ceo vs Bombardier Q300 Efficiencies Substantially lower ↑ 31% ↑ 23% ↑ 36%* operating costs
Slide 19: Financial priorities
For personal use only priorities Financial
Slide 20: Financial framework – our 2016 performance
Financial framework – our 2016 performance For personal use only 1 Excluding fuel price movement, foreign exchange and divestments. 2 Excluding other significant items. Refer to the appendix. 20
Slide 21: Profitable growth driven by disciplined capacity management and CASK improvement
Profitable growth driven by disciplined capacity management and continuous CASK improvement For personal use only Capacity aligned with tourism growth Efficiencies driving CASK** improvement Investment in fuel efficient and simplified aircraft resulting in: • 2017 financial year capacity in range of
Slide 22: Capital discipline focusing on balance sheet strength
Capital discipline focusing on balance sheet strength For personal use only Stable investment grade rating Gearing targeted between 45% - 55% Moody’s rating 70% Baa1 60% 52.4 Baa2 48.6 Target Investment 50% 46.1 range grade 42.9 39.3 40% Baa3 30% Ba1 20% Ba2 10% Ba3 0% 2012 2013 2014 2015 2016 Sourc
Slide 23: Effective risk management underpins our financial framework
Effective risk management underpins our financial framework For personal use only Hedging Liquidity Funding flexibility Fuel • Target liquidity ratio of 20% to 30% • Quarterly disclosure of hedging profile • Well positioned to access financial published on investor centre website • Historically have
Slide 24: Disciplined financial framework focused on long-term shareholder return
Disciplined financial framework focused on long-term shareholder return For personal use only Targeting pre-tax ROIC > 15% Targeting consistent and sustainable through the cycle ordinary dividends Pre-tax return on invested capital Ordinary dividends declared per share 30% 30.0 25% 22.0%* 20.0 20% 2
Slide 25: Appendix
For personal use only Appendix
Slide 26: Earnings before other significant items and taxation
Earnings before other significant items and taxation For personal use only June 2016 June 2015 Movement $M $M % Earnings before taxation (per NZ IFRS) 663 474 40% Add back other significant items: Virgin Australia partial divestment 86 - - Settlement of legal claim 57 - - Earnings before other signi
Slide 27: Pre-tax ROIC calculation
Pre-tax ROIC calculation For personal use only June 2016 June 2015 Reference in 2016 Annual $M $M Financial Results Statement of Financial Performance (page 2) Earnings before other significant items and taxation 806 474 Add back: Net finance costs 47 52 Statement of Financial Performance (page 2) N
Slide 28: Operating fleet ownership and lease structure
Operating fleet ownership and lease structure (as at 30 June 2016) For personal use only Owned Operating Lease Total Boeing 777-300ER 4 3 7 Boeing 777-200ER 4 4 8 Boeing 787-9 Dreamliner 6 - 6 Boeing 767-300ER 4 - 4 Airbus A320 14 15 29 ATR72-600 13 - 13 ATR72-500 11 - 11 Bombardier Q300 23 - 23 Bee
Slide 29: Projected aircraft in service
Projected aircraft in service (as at 30 June 2016) For personal use only 2016 2017 2018 2019 2020 2021 Boeing 777-300ER 7 7 7 7 7 7 Boeing 777-200ER 8 8 8 8 8 8 Boeing 787-9 6 9 11 12 12 12 Boeing 767-300ER 4 - - - - - Airbus A320 29 30 25 18 17 17 Airbus A320/A321 NEO - - 6 13 13 13 ATR72-600 13 15
Slide 30: Key operating statistics
Key operating statistics (For the year to 30 June) For personal use only 2016 2015 2014 2013 2012 Passengers Carried (000) Domestic 9,725 9,246 8,920 8,694 8,500 International Australia and Pacific Islands 3,507 3,388 3,277 3,181 3,073 Asia * 791 642 517 596 652 America and Europe 1,138 1,021 1,005
Slide 31: Key financial metrics – five year statistical review
Key financial metrics – five year statistical review (As at and for the year to 30 June) For personal use only 2016 2015 2014 2013 2012 Profitability and Capital Management EBIT 1/Operating Revenue % 15.9 11.1 8.4 6.7 3.5 EBITDRA2/Operating Revenue % 29.5 23.6 21.6 19.4 15.9 Passenger Revenue per Re
Slide 32: Five year summary of Financial Performance
Five year summary of Financial Performance (For the year to 30 June) 2016 2015 2014 2013 2012 For personal use only $M $M $M $M $M Operating Revenue Passenger revenue 4,481 4,113 3,851 3,765 3,634 Cargo 349 317 287 301 298 Contract services 172 258 277 310 316 Other revenue 229 237 237 239 235 5,231
Slide 33: Five year summary of Financial Position & Cash Flows
Five year summary of Financial Position & Cash Flows (As at and for the year to 30 June) 2016 2015 2014 2013 2012 For personal use only $M $M $M $M $M Summary of Financial Position Current Assets Bank and short-term deposits 1,594 1,321 1,234 1,150 1,029 Other current assets 745 661 593 693 658 Tota
Slide 34: Glossary of key terms
Glossary of key terms Available seat kilometres (ASKs) Number of seats operated multiplied by the distance flown (capacity) For personal use only Cost/ASK (CASK) Operating expenses divided by the total ASK for the period EBIT Earnings before interest and taxation EBITDRA Earnings before interest, ta
Slide 35: Investor relations
Investor relations For personal use only Resources Investor website: www.airnewzealand.co.nz/investor-centre Monthly traffic updates: www.airnewzealand.co.nz/monthly-operating-data Quarterly fuel hedging disclosure: www.airnewzealand.co.nz/fuel-hedging-announcements Corporate governance: www.airnewz
Slide 36: For personal use only
For personal use only Le AIR NEW ZEALAND Yo A A STAR ALLIANCE MEMBER YS”