Forum Archive Index - February 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Michael,

 

I am not too keen on the word "experienced" investor but like Hugh Webber, don't like airlines.

 

All over the world they tend to have very erratic earnings. And I don't like AIR ( Air New Zealand ) because of Brierly involvement!

 

Unlike other airlines they did not hedge the oil price when it was so low @ $US 10-20 !

 

They now have a new CEO, he may be able to do something but there are heavy costs.

 

I thought that they had paid too much for Ansett and it is becoming clearer, that they did so !

 

Another one - in my opinion - is 'the Aussie factor':They tend to be far more parochial and hate their companies to be owned by foreigners.( Some Aussies will disagree with this thought. ) 

 

Therefore, I feel that the ticket price has to be lower than that of Qantas before they would use another airline.

 

As you know there were problems with Ansett planes due to poor maintenance. That is not normally the case.

It may indicate that there were management problems as well.

 

In my opinion, they could be running close to - or even at a loss for some time. 

You need to check as to the ownership of planes. Normally, they would lease some as well.

 

If they own quite a few, then depreciation charges will be high.( Most likely they will tend to lease more when there is little cash flow ). 

 

I have indicated in Forum that their debt levels tend to be high. They " fix " this with a cash issue coupled with some more borrowing.

 

AIR will most likely need refinancing.

Their covenant with their Bank(s) may prescribe refinancing should the share price fall below a certain level.

 

Another cash isue is not likely as the price of new stock will need to be set  too low to be acceptable.

In any case, the market will not accept another so soon after the last one!

 

I think that right now AIR will be approaching the Government and arrange for Singapore to take an increased stake in AIR. 

 

         Singapore could dictate any terms !! 

 

I don't think that I would hold AIR in these conditions.

 

I could be wrong but in your case I would sell as soon as the exchange opens!!  

 

---

Had you written a few days ago, then I would have recommended a switch to AIA !

 

I own stock and still like it; it rose today; unfortunately for you, the interim announcement could be imminent! You may have to move quickly if you want to buy any!! 

 

Note that if Singapore gets control of - or a large stake in - Air New Zealand ( AIR ), this will immediately raise the share price of Auckland Airport ( AIA) !

 

I think that the investor with some foresight may already have started buying in AIA!

 

Gerry