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| From: | Greg <g&jelliott@xtra.co.nz> |
| Date: | Tue, 01 May 2001 23:25:36 +1200 |
Thanks Bruce, Snoopy and Peter. Interesting discussion. Air NZ have posted alot of data (performance results, forecasts, issues, strategy) on their website. Plus I've just scanned through 800 media articles looking at the two airlines over the last year. I'm not a 'qualified' analyst, but I suspect the prognosis may not be as bad as recent media and some share-houses present. Reminds me of the bad press Apple computer was getting in 96, as they slid into the red. OK - that may be drawing a long bow, but my money is still on Air NZ for a quicker and more sustainable recovery than is predicted. The mechanisms are largely in place (management restructure, overhaul of engineering practices, fleet replacement, cultural realignment), plus a number of associated revenue earners (including the P&W JV). They made mistakes during the transition...OK, I'll be honest - it was a mess. Leadership vacuum and one of the most difficult trading periods in ten years. But we are seeing a major change in philosophy from the McCrea/Cushing era to the Toomey era. There are intangibles here which have the potential to lift the groups performance (Toomey's more approachable leadership style and willingness to invest, which may unlock more of the potential residing within the expanded group). It has taken time (not quick enough to stop CASA), but the building blocks are being put in place to unlock the synergies of integration and not only compete, but dominate. Also, don't discount the influence and cash power of SIA, working from behind the scenes. The same SIA who owns nearly half of Virgin Blue! In NZ, I suspect Air NZ will be able to compete with Virgin's no frills, if and when, using Freedom. Keeps the backpackers happy - not a money spinner, but its about dominance. They're already ahead so far. The real battle will be with Qantas, and for the business customers. At this stage, looks like Qantas' is mainly focused on main trunk routes, plus some provincials with Origin. Air NZ has a head start then, and a larger net and will compete head-on. They could afford to do some minor optimisation on the provincial routes to sew these up (the SAAB is a reliable work horse on existing routes but they could do with 2 more, also more ATRs and focus on the shorter main trunk routes, and focus the Beech 1900s on the short provincial routes). There is growth potential here. I hope the new 'Ventures' division are working on this already - the provincials were a bit slow off the mark when Qantas NZ crashed. Oh, and remember that it was 'Qantas' who crashed! The real battle in Australia is against Qantas/Impulse (ex), where the corporate customers are. Hazelton offers valuable routes and schedules. Toomey's staff will be focused on completing the rationalisation of management initiatives (IT, downsizing, network planning, marketing - including some 'rebranding' to rebuild customer confidence and loyalty) and regain market share. At the international level, the new groups focus has always been on Australasia, plus LA which is lucrative. Air NZ pulled out of Europe - those routes are now covered by code-sharing through the Star Alliance. This talk about access to London as an offset for allowing Virgin into NZ is a red herring. Virgin Blue cannot provide any offset to the UK, since it is an Australian airline. Besides, the UK is not the group's strategic focus - Australasia is. As a combined group, they have the routes and access to make this hum, and its a growing market - especially if the similarities noted between the USA in the 1980s and Japan today prove substantial - watch Japan! It would be interesting to re-do Snoopy's analysis again soon (I liked the analysis, don't know that the loss will be that great, and in any event it will be the bottom). Basically, Air NZ were knocked up against the ropes recently, but they're in this for the long haul, and I believe they are right now positioning for a good fight. Not to be overlooked. Disc (hold AIRVB) Greg Elliott From: Bruce Withers <withers@xtra.co.nz> > Reply-To: sharechat@sharechat.co.nz > Date: Tue, 01 May 2001 21:00:37 +1200 > To: sharechat@sharechat.co.nz > Subject: Re: [sharechat] Airline shares > > Re British Air Rights: > Heathrow is almost at gridlock...who wants to encourage more landings from Air > NZ? Not in the Brits interest, so not an arguement for Virgin. > > Rgds > > Bruce > > "tennyson@caverock.net.nz" wrote: > >> Hi Peter, >> >> I enjoyed your wee rant on Airline shares. But here are some of the >> counter view points, with particular regard to Air New Zealand. >> >>> >>> Airline in the news a lot - what future for them? Will Air New >>> Zealand ever make money again? >>> >>> The orange Virgin 767 looks pretty impressive, and at home, sitting >>> on the tarmac at Wellington this afternoon. >>> >> >> And that may be the last we see of it. It would seem Virgin are >> mainly interested in the trans- tasman route, with an Auckland >> Wellington Christchurch sweep stitched into the middle while they are >> here. There is the tiny matter of international air rights to be >> negotiated. And if Virgin are successful, it would seem that Air >> New Zealand would get some compensation through better access to the >> British market. >> >>> >>> As said earlier AIRVA share price been trending down since 1993. >>> >> >> Air New Zealand is not really the same company any more. It has >> gone from being a a niche fringe airline to a global sized player as >> it doubled in size. I don't think you can take the past trend of >> AIRVA as a useful future predictor of the direction of AIR from here >> on. >> >> >>> >>> I have re-read the Unlimited story 'On a wing and a prayer' >>> >>> One part of the article that struck me was - >>> Andy Serwer wrote about >>> investment in airline stocks. "Never, I repeat, never buy >>> airlines," he said. His rationale was that airlines have the >>> cost structure from hell. To whit: >>> >>> >>> a.. They have to borrow huge sums of money to buy planes, >>> leaving them at the whim of interest rates (a factor totally >>> out of their control). >>> >>> >> >> Globally the world's equivalents of our Don Brash seem to be doing >> what they can to keep interest rates low. I don't see the return of >> 20% interest rates which sank some airlines in the mid 1980s. >> >>> >>> >>> b.. They use huge amounts of fuel, leaving them at the whim of >>> oil prices (a factor totally out of their control). >>> >>> >> >> As far as I can tell the bad news of rising fuel prices over the last >> year or so have already been built in to current airline share >> prices. I feel it unlikely that the world's oil producing nations >> will drastically spike prices again in the foreseeable future. >> >>> >>> >>> c.. They are at the whim of strong unions >>> (you guessed it, a factor almost totally out of their >>> control). >>> >>> >> >> Air New Zealand would probably have a better employment record than >> say Qantas New Zealand or Kiwi Air. If anything AIR are able to >> dictate the wages paid to their employees, not the other way around. >> There aren't too many other airline operators out there for >> disgruntled employees to move to. >> >>> >>> >>> d.. >>> If, Serwer argues, some of the world's most serious investors - >>> including Warren Buffett with US Air - can lose big-time buying >>> into airlines, what hope is there for the rest of us? >>> >>> >> >> Buying into a US Airline in the USA is more akin to buying into a >> small shuttle bus company in New Zealand, rather than buying into Air >> New Zealand. >> >> US Air is a domestically focussed business. There are few >> regulatory barriers to operating within the United States for a new >> airline start up. On the other hand, an operator wishing to compete >> with Air New Zealand on international routes must negotiate >> international landing rights with the New Zealand Government (if a >> foreign airline) or with a foreign government (if New Zealand based). >> >> It could be argued that, Origin Pacific excepted, Air New Zealand is >> the only operator with a credible record of running a sustainable >> Airline business in our country's history. >> >>> >>> >>> Airline shares for me - no way >>> >>> >> >> I wouldn't buy 'Airline shares'(generic) either. But that >> doesn't mean you can't have a successful investment if you >> selectively buy only the best 'Airline share'. SNOOPY >> >> disclosure: Holds AIR >> >> --------------------------------- >> Message sent by Snoopy >> e-mail tennyson@caverock.net.nz >> on Pegasus Mail version 2.55 >> ---------------------------------- >> "You can tell me I'm wrong twice, >> but that still only makes me wrong once." >> >> ---------------------------------------------------------------------------- >> http://www.sharechat.co.nz/ New Zealand's home for market investors >> http://www.netbroker.co.nz/ Trade on Credit, Low Brokerage. Join now. >> ---------------------------------------------------------------------------- >> To remove yourself from this list, please use the form at >> http://www.sharechat.co.nz/forum.shtml. > > > ---------------------------------------------------------------------------- > http://www.sharechat.co.nz/ New Zealand's home for market investors > http://www.netbroker.co.nz/ Trade on Credit, Low Brokerage. Join now. > ---------------------------------------------------------------------------- > To remove yourself from this list, please use the form at > http://www.sharechat.co.nz/forum.shtml. ---------------------------------------------------------------------------- http://www.sharechat.co.nz/ New Zealand's home for market investors http://www.netbroker.co.nz/ Trade on Credit, Low Brokerage. Join now. ---------------------------------------------------------------------------- To remove yourself from this list, please use the form at http://www.sharechat.co.nz/forum.shtml.
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