Air New Zealand Limited · NZX:AIR
Air New Zealand — FY2008 Earnings Presentation
29 slides from Air New Zealand's earnings presentation, Aug 26, 2008
Slide 1: Annual Results 2008
AIR NEW ZEALAND For personal use only ANNUAL RESULTS 2008 1 2008 ANNUAL RESULTS
Slide 2: Highlights
HIGHLIGHTS For personal use only • Record operating revenue, up 9% • Normalised earnings* $197m • Net cash position of $1.3bn • Launched direct service to Vancouver and Beijing • Award winning product and service • Revenue per employee up 4% * Normalised Earnings before unusual items and taxation af
Slide 3: Main Drivers
MAIN DRIVERS For personal use only • Capacity increase of 5.4% • Passenger load factor up 2.8 percentage points • Increased freight and third party revenue • Increased competition in domestic market • Jet fuel price up 33% on an unhedged basis • Softening economic conditions 3 2008 ANNUAL RESULTS
Slide 4: Key Influences on Profitability
KEY INFLUENCES ON For personal use only PROFITABILITY $m 900 $83m ($88m) 800 ($300m) 700 $139m 600 $302m 500 400 ($50m) ($109m) $107m $304m 300 $259m ($4m) ($35m) 200 $197m 100 0 Normalised Traffic Yield Freight & Labour Fuel Maint- Aircraft FX Other Normalised Hedge Reported earnings contract enanc
Slide 5: Performance: Long Haul
PERFORMANCE For personal use only LONG HAUL • Load factor over 80%, passenger numbers up 12.3% • Launched direct service to Vancouver and Beijing • Business premier and PPE* performing well • Gate-to-gate inflight entertainment and concierge • Continued optimisation of long haul network * Pacific Pr
Slide 6: Performance: Domestic
PERFORMANCE For personal use only DOMESTIC • Increased capacity by 7.5% • Five more Q300 turbo props introduced to fleet • Increased passenger numbers by 6.1% • Load factor decreased by 0.7 percentage points • Introduction of the KoruHour, Space+ Seats 6 2008 ANNUAL RESULTS
Slide 7: Performance: Tasman & Pacific Island
PERFORMANCE For personal use only TASMAN & PACIFIC ISLAND • Decreased capacity by 1.9% • Load factor up 2.7 percentage points • Merging of Freedom with Air New Zealand • IFE* upgrade programme commenced * Inflight entertainment 7 2008 ANNUAL RESULTS
Slide 8: Performance: Productivity
PERFORMANCE For personal use only PRODUCTIVITY $,000s Revenue per Employee 440 420 400 380 360 340 320 300 FY03 FY04 FY05 FY06 FY07 FY08 • $37m extra cost savings achieved in 2008 • $361m per annum in savings are now being delivered from business transformation initiatives already implemented 8 2008
Slide 9: Performance: Customer Service
PERFORMANCE For personal use only CUSTOMER SERVICE • ATW - Best Passenger Service • OAG - Best Transpacific Airline • Skytrax - Second best business class • Guardian Observer - runner up for Best Airline 9 2008 ANNUAL RESULTS
Slide 10: Strategy: Priorities
STRATEGY For personal use only PRIORITIES • Closely matching supply to demand • Being the leader in chosen markets • Introducing short haul innovations • Long haul focus on service and sales strategy • Growing non-airline revenue sources • Being the world’s leading environmentally sustainable airlin
Slide 11: Strategy: Long Haul Priorities
STRATEGY For personal use only LONG HAUL PRIORITIES • Network changes in response to demand • Implementation of fuel efficiency innovations • Continuing North Asian network expansion • Building on service and product offering • Strategic planning for B777-300ER and B787-9 11 2008 ANNUAL RESULTS
Slide 12: Strategy: Short Haul Priorities
STRATEGY For personal use only SHORT HAUL PRIORITIES • Domestic airport, inflight and loyalty changes • Inflight entertainment for all seats on Tasman • New Grabaseat “everyday low fare” initiatives • Space+ Seats across short haul international 12 2008 ANNUAL RESULTS
Slide 13: Strategy: Other Business
STRATEGY For personal use only OTHER BUSINESS • Cargo – Optimisation of core business • Engineering – High utilisation of facilities with third party focus • Airpoints – Exploring wider applications outside air travel 13 2008 ANNUAL RESULTS
Slide 14: Strategy: Environment
STRATEGY For personal use only ENVIRONMENT • Being world’s leading environmental airline – Biofuels development – Fuel efficiency innovations – Environmental Management System – Voluntary carbon off-set programme – Air New Zealand Environmental Charitable Trust 14 2008 ANNUAL RESULTS
Slide 15: Financial Management Highlights
FINANCIAL MANAGEMENT For personal use only HIGHLIGHTS • $1.3bn cash on balance sheet at year end • Gearing 45.5%, 7.6 percentage point improvement • Average fleet of 6.5 years • Moody’s rating – Ba1 stable • Full year dividend at 8.5 cents per share • 2 x Boeing 747-400s sold and leased back 15 2008
Slide 16: Capex Projection
CAPEX PROJECTION For personal use only $600m $500m $400m $300m $200m $100m $0m FY08 FY09 FY10 FY11 1. Includes progress payments on aircraft 2. Assumes NZD/USD = 0.75 16 2008 ANNUAL RESULTS
Slide 17: Risk Management: Fuel Hedging
RISK MANAGEMENT For personal use only FUEL HEDGING* • The first half of FY09 is approx. 74% hedged with the average ceiling at US$104 per barrel of WTI crude oil • The second half of FY09 is approx. 38% hedged with the average ceiling at US$127 per barrel of WTI crude oil * Fuel hedge position as at
Slide 18: Risk Management: Currency Hedging
RISK MANAGEMENT For personal use only CURRENCY HEDGING • 2009 US dollar operating cash flow exposure is approx. 90% hedged at an average NZ$/US$ rate of 0.76 • US$319m of future capex commitments are hedged at NZ$/US$ rate of 0.75 (spot) 18 2008 ANNUAL RESULTS
Slide 19: Outlook
OUTLOOK For personal use only • Volatile trading conditions • Strong financial position • Competitive strength in core markets Based on the existing hedging policy and network plan, in the current market conditions Air New Zealand expects to operate profitably, on a Normalised Earnings basis, if the
Slide 20: Supplementary Information
SUPPLEMENTARY INFORMATION For personal use only • Financial overview • Hedges relating to other financial period • Group operating performance • Group operating statistics • Long haul operating statistics • Short haul operating statistics • New aircraft arrivals • Operating fleet 20 2008 ANNUAL RESU
Slide 21: Financial Overview
FINANCIAL OVERVIEW For personal use only Dollar Percentage June 2008 June 2007 movement movement Operating revenue $4,667m $4,279m $388m 9% Normalised Earnings* $197m $259m $(62)m (24)% Net profit after tax $218m $221m $(3)m (1)% Adjusted operating cash flow $662m $626m $36m 6% Net cash $1,289m $1,0
Slide 22: Hedges Relating to Other Financial Periods
HEDGES RELATING TO OTHER For personal use only FINANCIAL PERIODS June 2008 June 2007 Earnings before Unusual Items and Taxation $304m $266m Reverse net (gains) / losses on non hedge accounted and ineffective derivatives that hedge exposures in other financial periods: Fuel derivatives $(129)m $1m Fo
Slide 23: Group Operating Performance
GROUP OPERATING For personal use only PERFORMANCE Year-on-Year Load Factor & Year to Date Yield Movements 12% 10% 8% 6% 4% 2% 0% -2% -4% Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Load factor % pt movement Yield Movement Yield Movement FX Adjusted 23 2008 ANN
Slide 24: Group Operating Statistics
GROUP OPERATING STATISTICS For personal use only June 2008 June 2007 Movement* Passengers carried 13.2m 12.5m 5.6% Available seat kilometres (ASKs) 36,991m 35,113m 5.4% Load factor 79.3% 76.5% 2.8 pts Yield (cents per RPK) 13.0 12.9 0.2% * Calculations based on numbers before rounding 24 2008 ANNUAL
Slide 25: Long Haul Operating Statistics
LONG HAUL OPERATING For personal use only STATISTICS June 2008 June 2007 Movement* Passengers 2.0m 1.7m 12.3% ASKs 22,243m 20,525m 8.4% RPKs 18,015m 15,894m 13.3% Load factor 81.0% 77.4% 3.6 pts * Calculations based on numbers before rounding 25 2008 ANNUAL RESULTS
Slide 26: Short Haul Operating Statistics
SHORT HAUL OPERATING For personal use only STATISTICS June 2008 June 2007 Movement* Passengers 11.2m 10.7m 4.5% ASKs 14,748m 14,588m 1.1% RPKs 11,334m 10,980m 3.2% Load factor 76.9% 75.3% 1.6 pts * Calculations based on numbers before rounding 26 2008 ANNUAL RESULTS
Slide 27: New Aircraft Arrivals
NEW AIRCRAFT ARRIVALS For personal use only Aircraft Type FY09 FY10 FY11 FY12 FY13 Boeing 777-300ER - 3 1 - - Boeing 787-9 - - - 3 2 Bombardier Q300 2 - - - - Beech 1900D 1 - - - - * In addition, one A320 currently on lease to XL Airways in Germany will be returned to the Air New Zealand fleet in No
Slide 28: Current Operating Fleet
CURRENT OPERATING FLEET For personal use only Aircraft Type June 2007 June 2008 June 2006 movement 2007 movement 2008 Boeing 747-400 8 - 8 - 8 Boeing 777-200ER 5 3 8 - 8 Boeing 767-300ER 7 (1) 6 (1) 5 Airbus A320-200 12 - 12 - 12 Boeing 737-300 14 - 14 2 16 ATR 72-500 11 - 11 - 11 Saab 340A 13 (10)
Slide 29: For personal use only
For personal use only 29 2008 ANNUAL RESULTS