Air NZ still rated 'buy' despite daily $500,000 ash-problem losses

Air New Zealand is still rated as a "buy" by sharebrokers, despite the national carrier burning $500,000 in cash a day through European air space being closed due to ash from the Icelandic volcano.

Forsyth Barr and Craigs Investment Partners both rate the company as a good buying opportunity.

Forsyth Barr broker Tony Conroy said yields were improving for the airline on a month-on-month basis.

"The volcanic ash issue is a buying opportunity.

Yes, it is costing $500,000 a day, but put into perspective, it will still be immaterial compared to the upside from higher revenue as passenger numbers and yields increase over the coming year.

"With a billion shares on issue, a $20 million cost is only 2c per share," he said.

Craigs broker Peter McIntyre said the costs caused by the volcanic ash related to numerous areas, including softer revenue as some customers had air fares refunded, weaker loads from Los Angeles and Hong Kong, and accommodation and food costs for stranded passengers.

Cost pressures had been mitigated by the April low season, the relatively low profitability of the London route and fuel savings.

Fuel prices had started easing in recent days, which might reflect the demand implications from the eruption, he said.

Air space opened yesterday in the United Kingdom.

Air NZ said it was planning to start operating some of its flights to and from London to begin clearing the backlog of passengers.

Priority for booking passengers on available seats was being undertaken in order of those stranded in Hong Kong and Los Angeles on their way to London on Thursday night, the company said in a statement.

The company said conditions in the UK and Europe remained changeable and services could be delayed or disrupted at any point.

In an earlier market update, Air NZ said it carried 1.24 million passengers in March, in line with the corresponding month last year.

Revenue passenger kilometres (RPK) were down 2.1% and capacity was reduced 8%, increasing the group's average loading statistics by 5%.

Short-haul numbers were 0.5% higher than in March last year.

Demand (RPK) increased in the domestic market by 2.6% and loadings increased by 3.5% to 81.8% as capacity was decreased by 1.7%.

Tasman-Pacific capacity was reduced by 7.6% in response to a fall in demand.

That helped increase loadings to 80.7%.

Long-haul passenger numbers were 3.6% lower than in March last year.

Capacity on the Asia-Japan-UK routes were reduced by 19.5% as demand fell.

On the North America-UK routes, demand increased by 2.5% with capacity reduced by 1.3%.

Group-wide yields for the financial year to date were down 8.9% on the corresponding period last year.

More than 87% of Air NZ's domestic flights departed within 10 minutes of scheduled departure time in March, the company said.

 

Add a Comment