Forum Archive Index - June 2001

["Bruce Harris" <bruce99@freemessage.com>]

Very interesting analysis by Snoopy and others on Air NZ. How necessary is the 
$5 billion? Clearly they need a lot of new planes for Ansett in particular in 
reasonably short order. As I understand it they can lease these- albeit 
presumably at a fair penalty vs owning. What else is the capital required for? 
Some debt repayment? Presumaby their reasonable cash position sees them okay in 
the short term there. 
In terms of future profit outlook, the picture is unclear at best. The 99 
profit was from memory without Ansett at 100%, albeit presumaby lower debt. Is 
the assumption that at best Ansett will make no money going forward. Is that a 
bit negative given that for that to happen presumaby Qantas also show a lowish 
return. Virgin Blue will presumably keep any thought of profit distant while 
they exist in present form- they already seem to be preparing spin doctors for 
some alternative strategy though, and then you are back to a reasonably cosy 
duopoly- albeit with Ansett having to fight desperately to hold market share. 
Landing spots at Sydney, Melbourne, Brisbane give it a fair hold, assuming the 
new planes. 
The NZ market should be more profitable than ever in the short term even with 
prices held- Air NZ at say 80% market share must give good economies at home, 
while inbound tourism looks good. 
separately assuming the recapitalisation in your model, presumably interest 
costs reduce somewhat- does that alone enhance profit significantly.
As to working with Virgin or using Freedom, can understand the temptation to 
use Freedom- any decision should depend on the advantage of cutting out Virgin- 
they may go anyway- and on the control/ returns likely in tie up with Virgin. 
Can imagine the Brits thinking in pounds and wanting more than their share; and 
in wanting control which defeats the purpose. 
Am sure we all wish Air NZ well- would prefer for everyone's sake that they 
found a way to have Brierleys out- clearly Bry wants that also. anyway time 
will tell- probably in the next few weeks as Bry will want to exit if they can 
before July 1 takeover rules come in- or is that just too tight for all the 
hurdles. 
Regards for now, Bruce


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