Daily ShareChat: Air New Zealand

By Jenny Ruth

Thursday 13th January 2011 1 Comment

Air New Zealand's capacity discipline and strong demand have driven its high load factors and positive yield growth which are contributing to operating earnings momentum, says Craigs Investment Partners.

That's despite unfavourable currency hedging and rising fuel costs providing a slight headwind, the broker says. Air New Zealand has hedged 91% of its US dollar operating cashflow requirements at 66 US cents compared to the year-to-date average 74 cent spot price.

The airline's passenger numbers were up 8.1% in the five months ended November and up 11% in November. "As demand recovers, capacity is being added at a slower pace, driving record load factors," it says.

Craigs says the Rugby World Cup and the Virgin Alliance on the Tasman route "arguably provide further upside to full-year 2012 estimates, should they be executed successfully."

The broker has raised its earnings per share forecast for the year ended June 2011 by 5% and its 2012 forecast by 8%.

It is forecasting net profit in the year ending June 2011 will be $150 million, up from $82 million the previous year, rising to $231 million in 2012.

Key risks to its forecasts include increased fuel costs, New Zealand dollar weakness and a weaker macro backdrop, Craigs says.

Recommendation: Buy.

Comments from our readers

On 13 January 2011 at 9:57 am Bas said:

No doubt additional profit has also been squeezed at the expense of passenger comfort and diminishing food quality/quantity