Air New Zealand Air New Zealand 2012 Annual Results Highlights - - PDF document

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Air New Zealand Air New Zealand 2012 Annual Results Highlights - - PDF document

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Air New Zealand Air New Zealand 2012 Annual Results Highlights Highlights Normalised earnings* before tax of $91m, up 21% $ Net profit after tax of $71m down 12% Net profit after tax of $71m, down 12% Significantly stronger second

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SLIDE 1

Air New Zealand Air New Zealand

2012 Annual Results

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SLIDE 2

Highlights Highlights

$

  • Normalised earnings* before tax of $91m, up 21%
  • Net profit after tax of $71m down 12%

Net profit after tax of $71m, down 12%

  • Significantly stronger second half performance
  • Strong liquidity; net cash position over $1 billion
  • Gearing improved to 46.1%
  • Final dividend of 3 5 cents per share (unimputed)
  • Final dividend of 3.5 cents per share (unimputed)

2 * Normalised Earnings before Taxation after excluding the net impact of derivatives that hedge exposures in other financial periods. Refer to supplementary slide 16 for a reconciliation to IFRS earnings.

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SLIDE 3

Key Drivers of Result Key Drivers of Result

  • Operating revenue up 3.3%

– Long haul: Growth offset by weak Europe and Japan Long haul: Growth offset by weak Europe and Japan – Tasman: Growth from Seats to Suit and Virgin Alliance – Domestic: Capacity and yield increases partially offset by reduced business travel during RWC and General Election – Cargo: Increased capacity with B773 introduction

  • Cost containment / reductions
  • Cost containment / reductions
  • Profit improvement initiatives ahead of expectation

3

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SLIDE 4

Changes in Profitability Changes in Profitability

400

NZ$m

$50m ($18m) ($248m)

300 350

$168m ($248m)

200 250 300

$121m ($21m) ($36m) $91m $94m

100 150 200

$75m $91m $

50 100

June 2011 Normalised Earnings before Taxation Passenger Revenue Other Revenue Labour Fuel Net FX Impact Aircraft Operations, Maintenance & Other Depreciation, Lease & Finance Costs June 2012 Normalised Earnings before Taxation June 2012 IFRS Profit before Taxation Normalised Earnings before Taxation after excluding the net impact of derivatives that hedge exposures in other financial periods. Refer to supplementary slide 16 for a reconciliation to IFRS earnings.

4

Taxation Taxation

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SLIDE 5

Building on Domestic Building on Domestic Strength

  • Increased demand combined with strengthening yield
  • Improving operating efficiencies with new aircraft

Larger A320s replacing B737s – Larger A320s replacing B737s

  • New fare structure and Grabaseat stimulating demand

g

  • Independent review confirms New Zealand has better

regional coverage and pricing than Australia USA & regional coverage and pricing than Australia, USA & Canada

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SLIDE 6

Continuing Tasman & Continuing Tasman & Pacific Island Success

  • Seats to Suit and Virgin Alliance driving growth
  • Seats to Suit success from offering value proposition

across diverse market

  • Virgin Alliance provides customers with a comprehensive

Australasian network and seamless travel Australasian network and seamless travel

  • Capacity increases to Perth and Hawaii
  • Seasonal service to Bali well received

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SLIDE 7

Long Haul Re-Engineering Long Haul Re-Engineering Underw ay

  • Revenue up 2%; yield up 4% (7.5% adjusted for FX)
  • Refocused sales and marketing strategy

Redeployment of capacity improving efficiencies

  • Redeployment of capacity improving efficiencies
  • Exit Beijing to focus on Shanghai. Daily by early 2013

j g g y y y

  • B773 aircraft replaced B747s, improving fuel efficiency

19% on a payload adjusted basis 19% on a payload adjusted basis

  • B773 have 40% more cargo capacity than B747s –

network wide cargo revenue up 7.2%

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SLIDE 8

Profit Improvement Profit Improvement Initiatives Increase to $250m

Total By Overhead Costs $60m FY13 Ancillary Revenue $40m FY14 Network $60m FY14 Network $60m FY14 Fleet $35m FY15 S l Ch i & Oth Di t C t $55 FY15 Supply Chain & Other Direct Costs $55m FY15 TOTAL $250m

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SLIDE 9

Loyalty and Ancillary Revenue

  • Focus on ancillary revenue
  • Skycouch proving popular
  • OneUp upgrade product successfully launched July

p pg p y y

  • Airpoints membership up 19% in the year to 1.2 million;

43% higher than 3 years ago 43% higher than 3 years ago

  • Strong launch of OneSmart card product – the Ultimate

Travel Companion Travel Companion

  • Continuing to develop new opportunities

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SLIDE 10

Investment in Virgin Investment in Virgin Australia

  • Equity investment increased from 14.99% to

19 99% 19.99%

  • Total investment carried at $220m*

$

  • Investment not equity accounted
  • Value of investment represents 24 cents of value

per Air NZ share**

*as at 30 June 2012 **as at 28 August 2012

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SLIDE 11

Financial Management Financial Management

  • Net cash improved 19% to over $1 billion
  • Gearing improved 0.6 percentage points to 46.1%
  • Average fleet age of 8.6 years
  • Moody’s rating held at Baa3

Moody s rating held at Baa3

  • $150m bond issue fully subscribed
  • Final dividend of 3.5 cents per share (unimputed)

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SLIDE 12

Key Strategic Priorities Key Strategic Priorities

  • Continued development and investment in strong

D ti t k Domestic network

  • Develop Virgin Australia Partnership

Develop Virgin Australia Partnership

  • Re-engineer International network performance
  • Maximise growth opportunities from partnerships
  • Develop loyalty business opportunities
  • Improve efficiency and effectiveness of cost base

Improve efficiency and effectiveness of cost base

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SLIDE 13

Earnings Momentum Earnings Momentum

  • Stronger second half earnings
  • Earnings trend positioning for future growth
  • Leaving currency losses behind
  • Leaving currency losses behind
  • Full impact of B773 replacing B747 to be felt
  • Redeployment of aircraft improving long haul

efficiency and competitiveness y p

  • Expect to more than double normalised earnings in

FY13 FY13

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SLIDE 14

S l t I f ti Supplementary Information

  • Financial overview
  • Normalised earnings
  • Cost efficiency
  • Aircraft capital commitments
  • Current hedge positions

g p

  • Labour efficiency
  • Key external inputs

Key external inputs

  • Group operating statistics
  • Current operating fleet
  • Current operating fleet

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SLIDE 15

Financial Overview Financial Overview

June 2012 June 2011 Dollar movement Percentage movement Operating revenue $4,483m $4,341m $142m 3.3% Normalised earnings* $91m $75m $16m 21.3% Net profit after tax $71m $81m ($10m) (12.3%) Operating cash flow $455m $446m $9m 2.0% Net cash position $1,027m $860m $167m 19.4% Gearing 46.1% 46.7% N/A 0.6 pts Annual dividend 5.5 cps 5.5 cps

  • * Normalised Earnings before taxation after excluding the net impact of derivatives that hedge exposures in other financial periods. Refer to

supplementary slide 16 for a reconciliation to IFRS earnings. 15

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SLIDE 16

Normalised Earnings* Normalised Earnings

June 2012 June 2011 E i b f T ti ( NZ IFRS) $94 $73 Earnings before Taxation (per NZ IFRS) $94m $73m Reverse net (gains) / losses on derivatives that hedge exposures in other financial periods: periods: Fuel derivatives ($11m) $7m Foreign exchange derivatives $8m ($5m) Normalised Earnings* before Taxation $91m $75m

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* Normalised Earnings represents Earnings stated in compliance with New Zealand IFRS after excluding net gains and loses on derivatives that hedge exposures in other financial periods. Normalised Earnings is a non‐IFRS financial performance measure that aligns the timing of recognition of derivative gains or losses with the underlying hedged transaction. The measure is subject to review by the Group’s external auditors.

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SLIDE 17

Cost efficiency Cost efficiency

2012 (cents) 2011 (cents) ( ) ( ) Cost per ASK (CASK) 11.57 11.34 E l d Exclude: Fuel (3.77) (3.33) FX hedges (0.19) (0.36) CASK (excl. Fuel and FX hedges) 7.61 7.65 ( g )

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SLIDE 18

Aircraft Capital Commitments Aircraft Capital Commitments

NZ$

  • 1. Includes progress payments on

aircraft 600 700 800

NZ$ m

aircraft.

  • 2. Assumes NZD/USD = 0.81
  • 3. Excludes capitalised maintenance
  • f approximately $60m per

300 400 500 600

  • f approximately $60m per

annum and non aircraft capital commitments. 100 200 300

Aircraft delivery schedule FY13 FY14 FY15 FY16

FY13 FY14 FY15 FY16

y

Boeing 787-9

  • 1

2

3

Airbus A320 1 3 4

  • ATR72-600

3 1 2 1

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SLIDE 19

Current Hedge Positions

F el

Current Hedge Positions

Fuel

  • The first half of FY13 is 76% hedged

Th d h lf f FY13 i 13% h d d

  • The second half of FY13 is 13% hedged

Volume bbls Ceiling USD Floor USD FY13 H1 Brent Calls 562,500 $113.00

  • WTI Collars

170,000 $106.40 $82.26 WTI C ll * 2 132 500 $103 50 WTI Calls* 2,132,500 $103.50

  • FY13 H2

WTI Calls 450,000 $98.93

  • * Includes impact of WTI Call spreads

Foreign Exchange

  • The FY13 US dollar operating cash flow exposure is approx. 79%

h d d t NZD/USD t f 0 7945 hedged at an average NZD/USD rate of 0.7945

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SLIDE 20

Labour Efficiency Labour Efficiency

  • Cost review initiatives beginning to take effect

470

NZ$ '000s

370 420 Revenue / Employee 270 320 Cost (excl. Fuel) / 220 270 2008 2009 2010 2011 2012 Employee

20

2008 2009 2010 2011 2012

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SLIDE 21

Key External Inputs Key External Inputs

  • NZ dollar remained strong against trading currencies
  • Fuel prices remain escalated

NZD/USD

NZD:USD Rate

Fuel prices remain escalated

/

Fuel

0.90 1.00 NZD/USD 160 180 200 USD / BBL

Singapore Jet WTI (Crude)

0 60 0.70 0.80 100 120 140 160 0.40 0.50 0.60 40 60 80 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan‐06 Jul‐06 Jan‐07 Jul‐07 Jan‐08 Jul‐08 Jan‐09 Jul‐09 Jan‐10 Jul‐10 Jan‐11 Jul‐11 Jan‐12 Jul‐12

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SLIDE 22

Group Operating Statistics

June 2012 June 2011 Movement* June 2012 June 2011 Movement Passengers carried (‘000s) 13,122 13,103 0.1% Available seat kilometres (ASKs) 32,618m 32,353m 0.8% Revenue passenger kilometres (RPKs) 27,013m 26,996m 0.1% Load factor 82.8% 83.4% (0.6 pts) Yield (cents per RPK) 13 5 13 1 3 0% Yield (cents per RPK) 13.5 13.1 3.0%

22 * Calculations based on numbers before rounding

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SLIDE 23

Domestic Performance Domestic Performance

June 2012 June 2011 Movement* June 2012 June 2011 Movement Passengers carried (‘000s) 8,500 8,530 (0.3%) A il bl t kil t (ASK ) 4 969 4 904 1 3% Available seat kilometres (ASKs) 4,969m 4,904m 1.3% Revenue passenger kilometres (RPKs) 4,050m 4,021m 0.7% Load factor 81.5% 82.0% (0.5 pts) Yield (cents per RPK) 28.7 28.1 2.0%

23 * Calculations based on numbers before rounding

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SLIDE 24

Tasman & Pacific Island Tasman & Pacific Island Performance

June 2012 June 2011 Movement* June 2012 June 2011 Movement Passengers carried (‘000s) 3,020 2,919 3.5% A il bl t kil t (ASK ) 9 278 8 962 3 5% Available seat kilometres (ASKs) 9,278m 8,962m 3.5% Revenue passenger kilometres (RPKs) 7,795m 7,470m 4.4% Load factor 84.0% 83.3% 0.7 pts Yield (cents per RPK) 11.8 11.6 1.6%

24 * Calculations based on numbers before rounding

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SLIDE 25

Long Haul Performance Long Haul Performance

June 2012 June 2011 Movement* June 2012 June 2011 Movement Passengers carried (‘000s) 1,602 1,654 (3.2%) A il bl t kil t (ASK ) 18 371 18 487 (0 6%) Available seat kilometres (ASKs) 18,371m 18,487m (0.6%) Revenue passenger kilometres (RPKs) 15,168m 15,506m (2.2%) Load factor 82.6% 83.9% (1.3 pts) Yield (cents per RPK) 10.2 9.8 4.0%

25 * Calculations based on numbers before rounding

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SLIDE 26

Current Operating Fleet Current Operating Fleet

Aircraft Type June 2011 2012 Movement June 2012 Boeing 747-400 5 (3) 2 Boeing 777-300ER 3 2 5 Boeing 777-200ER 8

  • 8

g Boeing 767-300ER 5

  • 5

Airbus A320-200 14 3 17 B i 737 300 15 (2) 13 Boeing 737-300 15 (2) 13 ATR 72-500 11

  • 11

Bombardier Q300 23

  • 23

Beech 1900D 18

  • 18

Total operating fleet 102

  • 102

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