Forum Archive Index - November 2000

["hugh webber" <hugh.webber@clear.net.nz>]

brilliant analysis Snoopy thanks heaps, I really enjoyed it, keep it
coming.
Disclosure: I sold out at $3.40 but despite Buffettology I keep having
this twitching in my fingers to buy back in which my brain tells me to
resist.

cheers,
hugh

----------
> From: tennyson@caverock.net.nz
> To: sharechat@sharechat.co.nz
> Subject: [sharechat] Air NZ AGM Report
> Date: Friday, 3 November 2000 6:28
> 
> Shareholders and members of the general public (registration and 
> verification was dispensed with) were shown to their seats by the 
> boys and gals in blue (yes they really were Air NZ cabin crew), as 
> if they were boarding some sort of jumbo jet.
> 
> After standing for a moment's silence, in respect of the Singapore 
> Airlines 747 crash, the meeting commenced.
> 
> Chairman, Sir Selwyn Cushing, emphasized that although the balance 
> sheet presented accounted for the consolidated AirNZ/Ansett entity 
> the earnings for the year did not (Ansett's revenues were presented 
> as though it was a 49% subsidiary).   So using earnings and asset 
> figures presented in the balance sheet would produce erroneous 
> 'return on investment' calculations.
> 
> It is too early to know if the Singapore Airlines crash will result 
> in a downturn in passenger bookings for Singapore Airlines and less 
> traffic being fed into the Air New Zealand end of the 'Star 
> Alliance'.  But the known problem factor facing Air New Zealand is 
> fuel costs.
> 
> Air NZ have a hedging policy that sees them largely covered up until 
> the end of December 2000.   Beyond this an impact of $100-125million 
> of unbudgeted for fuel costs will severely impact the last *half* of 
> the financial year ending June 2001.  I only heard the $100m figure 
> quoted in the written media reports, but Sir Selwyn definitely 
> mentioned the latter figure too.   'Market sentiment' was for the NZ 
> dollar to now increase in value and fuel prices to drop.  So if this 
> doesn't happen by the end of December, we are looking at an ongoing 
> blowout of $250million per year in the fuel budget.   The impression 
> I got was that beyond December 31st 2000 Air NZ is completely 
> unhedged on both currency and fuel prices.  This wipes out most of 
> the $350million identified as synergystic savings from the 
> combination of the Air New Zealand and Ansett businesses.
> 
> Airline commentator Peter Wakeman noted that last time a third 
> domestic airline operated in Australia (Compass), Ansett's revenues 
> were affected to the tune of $250million.   The question was asked 
> what effect the new 'third players' are having on Ansett revenues 
> today.   Whatever the effect an answer wasn't forthcoming, but I 
> think it would be fair to say that combined with the fuel cost 
> increases, the Air New Zealand/Ansett synergy savings have now 
> evaporated. 
> 
> There does appear to be considerable disquiet in the travel agent 
> ranks.   Apparently Air NZ have been trawling through IATA 
> computer records in the United States and cherry picking customers.  
> Then those businesses that ticket through travel agents, are being 
> approached direct by Air NZ.   This together with the slashing of 
> Agent's commission fees, sees a far from happy front bench.   
> Amazingly, no attempt was made to deny this practice, the argument 
> being that travel agents who book airline tickets *alone* (not as 
> part of a hotel/rental car package) do not add value, and the 
> internal booking quota system is designed to cut these people out of 
> the loop. Effectively the message was 
> 'Yes we are behaving like rogues, but all the other airlines have 
> access to the same information and so will be doing it too if they 
> already aren't.'
> Maybe it is just an adjustment that the travel agents have to go 
> through.  In the meantime they aren't happy and one travel agent who 
> is also a shareholder even admitted booking people on other airlines 
> because of this practice.
> 
> Air New Zealand profits were well below budget for the first 
> quarter, but since first quarter profits only represent 10% of those 
> projected for the year this may not be as disastrous as other 
> printed reports seem to make out.
> 
> Much was made of the fact that the new Air New Zealand was now the 
> 18th-20th largest airline in the world.   Indeed, it might be fair to 
> say that 'Air New Zealand' is New Zealand's only listed globally 
> significant business.   
> 
> All in all the meeting was a professionally presented and slickly run 
> 'good sell'.  Unfortunately the analysis of the figures presented 
> suggests that 'Sell' is also the correct shareholder trading strategy 
> at this time.   This afternoon's shooting means that Fiji looks out 
> as a destination again and I predict than in a couple of months 
> Air NZ will be cheaper than it is now.  For those longer term holders 
> buckle up your seat belts, as you will be in for a rough ride this 
> year.  The report card reads worse than expected.  Better take a 
> packed lunch too as I can see a 'no to very low' dividend being paid 
> in 2001. SNOOPY
> 
> (disc: Holds Air NZ, makes own lunch)
> 
>  
> ---------------------------------
> Message sent by Snoopy 
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
> "Dogs have big tongues, so you can bet they don't 
> bite them by accident"
> 
>
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