Daily ShareChat: Air New Zealand

By Jenny Ruth

Tuesday 15th December 2009

Air New Zealand's October fuel and traffic update indicates demand is stabilising with capacity declines flattening out at about 10%, says Craigs Investment Partners analyst Geoff Zame.

"With load factors strong and fuel and currency hedged around spot, the focus remains on yield." Zame says.

The airline's group load factor increased 3.3 percentage points to 80% in October (80.7% year-to-date), driven off a 10.3% reduction in capacity which exceeded a 6.4% reduction in demand, he says.

"Significant capacity reductions made in (the year ended June) 2009 are now washing through; we expect 2010 capacity to be down around 10% on the previous comparable period."

Absolute capacity, demand and yields are stabilising at lower levels, Zame says.

"Given the broader economic recovery now underway, and with load factors generally leading yields, we expect the rate of decline to moderate with yield growth returning from the fourth quarter of 2010."

Air New Zealand's fuel position indicates it has hedged about 80% of its expected 2010 fuel requirements of 7.25 million barrels with most of the heding having a ceiling of $US75 a barrel compared with the current spot price of $US85 a barrel.

"Air New Zealand remains well positioned for a cyclical recovery in demand," Zame says.

BROKER CALL: Craigs Investment Partners rate Air New Zealand as buy.

Comments from our readers

No comments yet