Air New Zealand has proved to be an airline-sector paradox as airlines around the world struggled to survive during the recession and the aftermath.
The national carrier remained profitable and paid respectable dividends and remains a "buy" for Craigs Investment Partners.
Craigs broker Chris Timms said Air NZ offered a relatively conservative exposure to the super cyclical airline sector.
"We view news-flow as the principal driver of the share price and expect the balance of news-flow to remain positive as macro conditions progressively improve, demand recovers, the long-haul product is launched and the market starts to price in a Rugby World Cup uplift from early next year."
At the six-month reporting period, Air NZ had $1.1 billion in cash on the balance sheet, a $400 million reduction for the previous year, reflecting debt repayments, hedge rollovers and progress payments on aircraft. That left gearing at a comfortable level of 46%, Mr Timms said.
Fleet age was 7.9 years and would improve materially with the retirement of the 747s for 777-300 ERs and the 737s for A320s in the next few years.
Among the operational highlights was the expansion of Air NZ's airports programme partners to include Kiwibank, ANZ-National Bank and BNZ, he said.
Short-haul highlights included the introduction of a standardised A320 fleet between 2011 and 2015 relative to the existing mix of 737 and A320 aircraft.
The new A320 aircraft would be deployed in a 171-seat configuration, below the Jetstar maximum of 180 seats and reflecting increased leg room available at the front of the aircraft for frequent fliers.
A revised short-haul offering would incorporate a four-tier product offering to enable the airline to compete with low-cost carriers - that have cheap lead-in fares which did not include bags or food, he said.
Transtasman initiatives also involved automated kiosks to facilitate faster check-in, not dissimilar to domestic routes.
Domestic business capacity was expected to increase by about 10% in 2011, Mr Timms said.
Additional capacity during the Rugby World Cup would increase total peak capacity by 25% during the year, including the introduction of four A320s during the 2011 financial year.
"Air NZ is not a principal sponsor of the Rugby World Cup but is expected to be a major beneficiary."
The timing of the tournament in September and October represented the shoulder season for Air NZ and it was unlikely to displace any underlying tourism flow. With the significant games scheduled for the weekend, week day business travel should not be disrupted.
The tournament was likely to result in short three to four-day transtasman trips but longer inbound trips of up to four weeks from the United Kingdom and other countries, Mr Timms said.
