investor presentation - interim results 2010 final · impact of derivatives that hedge exposures in...

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HIGHLIGHTSHIGHLIGHTSHIGHLIGHTSHIGHLIGHTS

• Normalised earnings* $96m, up $70m

• Net cash position of $1.1bn

• Gearing stable at 46.0%

• ATW Airline of the Year

• Unveiling of new long haul product

• Airpoints™ developments

* Normalised earnings before taxation after excluding the net impact of derivatives that hedge exposures in other financial

periods

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MORE STABLE OPERATING ENVIRONMENTMORE STABLE OPERATING ENVIRONMENTMORE STABLE OPERATING ENVIRONMENTMORE STABLE OPERATING ENVIRONMENT

• Air travel demand bottoming out

• Lower spot fuel prices, long term upward trend continues

• More stable foreign exchange rates

• Competition remains intense

NZ$ / US$ US$ / BBLUS$ FOREIGN EXCHANGE

0.50

0.55

0.60

0.65

0.70

0.75

0.80

Jul Aug Sep Oct Nov Dec Jan Feb

FY10

FY9JET FUEL SPOT PRICEJET FUEL SPOT PRICEJET FUEL SPOT PRICEJET FUEL SPOT PRICE

50

70

90

110

130

150

170

190

Jul Aug Sep Oct Nov Dec Jan Feb

FY10

FY9

4444

KEY INFLUENCES ON PROFITABILITYKEY INFLUENCES ON PROFITABILITYKEY INFLUENCES ON PROFITABILITYKEY INFLUENCES ON PROFITABILITY

$NZ (m)

96

(1)(65)

2929

28

15

(9)(40)

26

(400)

(300)

(200)

(100)

0

100

200

300

Dec 2008

Normalised

Earnings

Before

Taxation

Yield Traffic Cargo,

Contract

Services &

Other

Revenue

Labour Fuel Price

and Volume

Aircraft

Operations

and

Passenger

Services

Sales and

Marketing

Net Finance

Costs

Net impact

of FX

(Including

Hedging)

Other Dec 2009

Normalised

Earnings

Before

Taxation

Hedge

Timing

Adjustment

Dec 2009

Reported

Profit

Before

Taxation

(251)

(12)

84335

5555

REVENUE MANAGEMENTREVENUE MANAGEMENTREVENUE MANAGEMENTREVENUE MANAGEMENT

*Revenue per Available Seat Kilometre

(16%)

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

JUL AUG SEP OCT NOV DEC JAN

YTD RASK* Change

YTD Yield Change

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LONG HAUL PERFORMANCELONG HAUL PERFORMANCELONG HAUL PERFORMANCELONG HAUL PERFORMANCE

• Passenger demand down 7.3%

• Capacity reduced by 8.7%

• Load factor improved 1.2 percentage points to

83.3%

• Yield down 12.5%

• Demand remained weak on Asian routes

• US routes showed signs of recovery

7777

LONG HAUL REVENUE MANAGEMENTLONG HAUL REVENUE MANAGEMENTLONG HAUL REVENUE MANAGEMENTLONG HAUL REVENUE MANAGEMENT

*Revenue per Available Seat Kilometre

Long Haul

(20%)

(18%)

(16%)

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

JUL AUG SEP OCT NOV DEC JAN

YTD RASK* Change

YTD Yield Change

8888

DOMESTIC PERFORMANCEDOMESTIC PERFORMANCEDOMESTIC PERFORMANCEDOMESTIC PERFORMANCE

• Demand up 4.8%

• Capacity relatively unchanged

• Load factor improved 3.8 percentage points to 77.2%

• Changing competitive dynamics

• OTP improved to 87.6%* on time

• A320s on order in move to a single narrow body fleet

• grabaseat™ an effective sales tool for low cost seats

* Air New Zealand adheres to a more disciplined 10 min standard than the rest of the market

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TASMAN & PACIFIC ISLAND PERFORMANCETASMAN & PACIFIC ISLAND PERFORMANCETASMAN & PACIFIC ISLAND PERFORMANCETASMAN & PACIFIC ISLAND PERFORMANCE

• Demand down 2.9%

• Reduced capacity by 10.5%

• Load factor improved 6.3 percentage points

• Rotorua/Sydney service launched

• Sydney to Rarotonga trial service announced

• Unstable market dynamics persist

10101010

SHORT HAUL REVENUE MANAGEMENTSHORT HAUL REVENUE MANAGEMENTSHORT HAUL REVENUE MANAGEMENTSHORT HAUL REVENUE MANAGEMENT

*Revenue per Available Seat Kilometre

SHORT Haul

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

JUL AUG SEP OCT NOV DEC JAN

YTD RASK* Change

YTD Yield Change

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• Cargo

– Revenue down on lower volumes and yields

– Cessation of Freighter lease in March 2009

• Engineering businesses continue to increase

revenue

– Marine & Industrial Gas Turbines

OTHER BUSINESSESOTHER BUSINESSESOTHER BUSINESSESOTHER BUSINESSES

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COST INITIATIVESCOST INITIATIVESCOST INITIATIVESCOST INITIATIVES

• Network optimised for demand levels

• Fuel efficiency initiatives continue

• Employee numbers reduced by 5% since December 2008

• Continuous cost management

Employee NumbersEmployee NumbersEmployee NumbersEmployee Numbers

10,000

10,200

10,400

10,600

10,800

11,000

11,200

Jun 2007 Dec 2007 Jun 2008 Dec 2008 Jun 2009 Dec 2009

Full

tim

e eq

uiva

lent

em

plo

yee

s

13131313

THE TRAVEL EVOLUTION CONTINUES

• World-first Long Haul product from November

• Continue to evolve Tasman/Pacific operations

• More capacity and everyday low fares for

Domestic operation with A320 arrival

14141414

STRATEGIC PRIORITIESSTRATEGIC PRIORITIESSTRATEGIC PRIORITIESSTRATEGIC PRIORITIES

• Making the most of any demand upside

• Promotion and delivery of new long haul

product

• Managing fleet replacement programmes

• Maintaining our environmental leadership

position

• Further development of Airpoints programme

15151515

FINANCIAL MANAGEMENTFINANCIAL MANAGEMENTFINANCIAL MANAGEMENTFINANCIAL MANAGEMENT

• $1.1bn cash, down $0.5bn on June 2009

– debt hedge roll over

– debt payments

– progress payments

– fixed asset additions

• Gearing 46.0%, 1.0% increase on June 2009

• Average fleet age of 7.9 years

• Interim dividend of 3.0 cents per share

16161616

AIRCRAFT CAPEX COMMITMENTSAIRCRAFT CAPEX COMMITMENTSAIRCRAFT CAPEX COMMITMENTSAIRCRAFT CAPEX COMMITMENTS

1. Includes progress payments on aircraft and is net of sale and lease back agreements

2. Assumes NZD/USD = 0.7

3. Excludes capitalised maintenance of approximately $50m per annum and non aircraft capex

$NZm

0

100

200

300

400

500

600

700

2010 2011 2012 2013

17171717

FUEL HEDGING*FUEL HEDGING*FUEL HEDGING*FUEL HEDGING*

• The second half of FY10 is approx. 90% hedged with the average

effective ceiling at US$76 per barrel of WTI crude oil

• At current prices, the average Singapore Jet fuel price after

hedging would be US$85 per barrel for the second half of FY10

compared with US$75 in the first half

• The first half of FY11 is approx 53% hedged with the average

ceiling of US$82 and average floor of US$70 per barrel of WTI

crude oil

*Fuel hedge position as at 19 February 2010

18181818

CURRENCY HEDGINGCURRENCY HEDGINGCURRENCY HEDGINGCURRENCY HEDGING

• Operating cash flow exposure for the second half of

FY10 is 91% hedged at an average NZ$/US$ rate of 0.66

• The FY11 operating cash flow exposure is 69% hedged at

an average NZ$/US$ rate of 0.64

• US$466m of future capex commitments are hedged at

NZ$/US$ rate of 0.73 spot

19191919

OUTLOOKOUTLOOKOUTLOOKOUTLOOK

• Stabilisation and recovery of the trading environment

• Challenge remains to improve passenger numbers and

yields

• We expect a more normal seasonal balance this year with

the second half weaker than the first

• foreign exchange hedging loss of around $20 million* in

the second half compared to a gain of $24 million in the

first half

• We expect the business to remain profitable in the second

half

*Based on current exchange rates continuing

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SUPPLEMENTARY INFORMATIONSUPPLEMENTARY INFORMATIONSUPPLEMENTARY INFORMATIONSUPPLEMENTARY INFORMATION

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FINANCIAL OVERVIEWFINANCIAL OVERVIEWFINANCIAL OVERVIEWFINANCIAL OVERVIEW

* Normalised earnings before taxation after excluding the net impact of derivatives that hedge exposures in other financial periods

--3.0 cps3.0 cpsInterim Dividend

5.9 ptsN/A51.9%46.0%Gearing

(23%)$(322)m$1,417m$1,095mNet cash

46%$52m$113m$165mAdjusted operating cash flow

133%$32m$24m$56mNet profit after tax

269%$70m$26m$96mNormalised earnings*

(15%)$(365)m$2,419m$2,054mOperating revenue

Percentage

movement

Dollar

movementINTERIM 2009INTERIM 2010

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$26m$96mNormalised Earnings before Taxation

$(1)m-Interest rate derivatives

$(88)m$11mForeign exchange derivatives

$101m$1mFuel derivatives

Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods:

$14m$84mEarnings before Taxation

INTERIM 2009INTERIM 2010

NORMALISED EARNINGSNORMALISED EARNINGSNORMALISED EARNINGSNORMALISED EARNINGS

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AIRCRAFT DELIVERY SCHEDULEAIRCRAFT DELIVERY SCHEDULEAIRCRAFT DELIVERY SCHEDULEAIRCRAFT DELIVERY SCHEDULE

5

3

-

FY14

-

4

-

FY15

122-Airbus A320

----Boeing 787-9

-23-Boeing 777-300ER

FY13FY12FY11FY10Aircraft Type

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QUESTIONS