Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2014 Earnings Presentation
26 slides from Air New Zealand's earnings presentation, Aug 27, 2014
Slide 1: Air New Zealand 2014 Annual Results
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Slide 2: Overview
Overview For personal use only > Normalised earnings* before taxation of , up 30% > Statutory earnings before taxation of , up 40% > Statutory net profit after taxation of > Operating revenue of > Strong operating cash flow of > Third consecutive year of earnings growth * Normalised earnings represe
Slide 3: Key drivers of result
Key drivers of result For personal use only > Passenger revenue to > Short haul capacity growth of > Yield improvements across the network of > Increased labour cost includes restructuring and fleet transition costs of > Decreased fuel cost due to more favourable hedging outcomes, fleet efficiencies
Slide 4: Strong operating cash flow
Strong operating cash flow For personal use only > Pretax operating cash flow > Increased tax payments of > Reflects quality of underlying earnings > Underpins strong liquidity position 4
Slide 5: Changes in profitability
Changes in profitability For personal use only *Normalised earnings before taxation represents Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding net gains and losses on derivatives that hedge exposures in other financial periods. Refer to the supplementary slides for a
Slide 6: Domestic
Domestic For personal use only > Continued strong performance with increased traffic and improving yields > Capacity as new aircraft enter fleet A320 now outnumbering B737-300 by , fleet transition complete by end of 2015 4 ATR72-600s now in service, with 5 more to come in the next 18 months > New
Slide 7: Tasman & Pacific Islands
Tasman & Pacific Islands For personal use only > Maintaining market leading position on the Tasman > Capacity increases from up-gauge to larger aircraft > Lower AUD impacting Australian derived revenue Passengers carried (‘000s) 3,277 3,181 3.0% Available seat kilometres (ASKs) 10,622m 10,277m 3.4%
Slide 8: International
International For personal use only > First of two additional leased B777-300ER aircraft now in service > Some capacity reduction due to withdrawal of Hong Kong-London route > Arrival of B787-9 and exit of B747-400 > Full year benefit of realigned long haul network Passengers carried (‘000s) 1,522 1
Slide 9: Cargo
Cargo For personal use only > Yields down in flat global market, offset by volume growth of > Pursuing innovative solutions through development of global virtual network > A key enabler for New Zealand’s exporters 9
Slide 10: Financial management
Financial management For personal use only > Net cash on hand > Gearing at > Fully imputed final dividend of , resulting in an increase in ordinary dividends for the year of > Fully imputed special dividend of > Moody’s investment grade credit rating, outlook stable 10
Slide 11: Virgin Australia update
Virgin Australia update For personal use only > Equity investment increased to > Air New Zealand Chief Executive Officer appointed to Board, 4 July 2014 > Alliance continuing to improve network proposition > Ongoing cost benefits through operational synergies 11
Slide 12: Progress on strategic priorities
Progress on strategic priorities For personal use only Exits of HK-London, > Improved performance Auckland-Osaka + Singapore Airlines > Network reach alliance + New aircraft deliveries (A320, B787, B777, ATR) > Efficiencies Airbus NEO order + Lounge upgrades, mobile technology > Engaged customers im
Slide 13: Network capacity growth in FY14
Network capacity growth in FY14 For personal use only > Capacity (ASKs) is expected to grow by during FY15 *Excluding the impact of exits from Hong Kong-London and Auckland-Osaka routes 13
Slide 14: Singapore Airlines alliance
Singapore Airlines alliance For personal use only > Full regulatory approval granted > Recommence flying to Singapore from Auckland > Will boost route capacity by around over time > Expansive network available to customers > Brings to life Pacific Rim growth focus 14
Slide 15: Aircraft capital expenditure
Aircraft capital expenditure For personal use only $NZm > Investment of in aircraft over the next 4 years > Includes progress payments on aircraft > Assumes USD/NZD = > Excludes capitalised maintenance of approximately and non-aircraft capital commitments FY15 FY16 FY17 FY18 FY19 Boeing 787-9 2 3 2
Slide 16: Customer
Customer For personal use only > Mobile app proving very popular with more than > Mobile device sales channel growing significantly > Upgraded inflight product offerings with B787-9 and refurbished B777-200 > Lounge upgrades progressing well 16
Slide 17: Loyalty
Loyalty For personal use only > Programme refresh completed > Airpoints membership engagement year-on-year highest in more than 5 years > Non-air revenues year-on-year > High Value Customer satisfaction levels at all time highs > Significant insights project undertaken, providing single customer vi
Slide 18: Continuous cost improvement
Continuous cost improvement For personal use only > Current year includes of transitional labour costs (0.13 cents per ASK) > Fleet modernisation, fleet simplification and scale economies from growth will continue reducing our cost base in the future > Objective to offset CPI increases on cost base
Slide 19: Financial reporting update
Financial reporting update For personal use only > Virgin Australia investment will be equity accounted in FY15 > Air New Zealand an early adopter of NZ IFRS 9 Financial Instruments (2013) Effective 1 July 2014 Better alignment of accounting with risk management strategies Will reduce accounti
Slide 20: Outlook
Outlook For personal use only > The coming year will see significant capacity growth as new fleet arrive. > As we continue to deliver on our strategic priorities, and based on our expectations of market demand and fuel prices at current levels, we expect to improve on the 2014 result in the coming y
Slide 21: Supplementary Slides
SUPPLEMENTARY SLIDES For personal use only 21
Slide 22: Financial overview
Financial overview For personal use only Operating revenue $4,663m $4,615m $48m 1% Normalised earnings * before taxation $332m $255m $77m 30% Statutory earnings before taxation $357m $255m $102m 40% Statutory net profit after taxation $262m $181m $81m 45% Operating cash flow $730m $750m ($20m) (3%)
Slide 23: Projected jet fleet
Projected jet fleet For personal use only Boeing 777-300ER 7 7 7 7 7 Boeing 777-200ER 8 8 8 8 8 Boeing 787-9 3 6 8 10 10 Boeing 767-300 5 2 - - - Airbus A320 26 28 28 23 17 Airbus NEO - - - 6 12 Boeing 737-300 2 - - - - * Seat weighted 23
Slide 24: Foreign exchange hedging
Foreign exchange hedging For personal use only > The first half of FY15 US dollar operating cash flow exposure is approximately at an average NZD/USD rate of 0.8326. > The FY15 US dollar operating cash flow exposure is at an average NZD/USD rate of 0.8402. 24
Slide 25: Fuel hedging
Fuel hedging* For personal use only > The first half of FY15 is > The second half of FY15 is Brent swaps 175,000 104.44 WTI swaps 75,000 95.80 Brent collars 2,287,500 106.91 99.27 WTI collars 275,000 95.84 85.56 Sing Jet swaps 112,500 114.89 WTI swaps 175,000 94.74 Brent collars 1,512,500 107.82 99.
Slide 26: Normalised earnings
Normalised earnings For personal use only Earnings before taxation (per NZ IFRS) $357m $255m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: Fuel derivatives ($22m) ($2m) Foreign exchange derivatives ($3m) $2m Normalised earnings* before taxation $332m $2