Forum Archive Index - May 2001

["Ben Dutton" <bendutton@sharechat.co.nz>]

Thanks for taking the time to write this post Greg, another great
contribution to this fascinating debate on Air New Zealand - I look forward
to more comment from sharechatters.

Best Regards

Ben Dutton
(Disc. do not hold AIRVA/B)

----- Original Message -----
From: "Greg" <g&jelliott@xtra.co.nz>
To: <sharechat@sharechat.co.nz>
Sent: Tuesday, May 01, 2001 11:25 PM
Subject: Re: [sharechat] Airline shares


> Thanks Bruce, Snoopy and Peter. Interesting discussion. Air NZ have posted
> alot of data (performance results, forecasts, issues, strategy) on their
> website. Plus I've just scanned through 800 media articles looking at the
> two airlines over the last year. I'm not a 'qualified' analyst, but I
> suspect the prognosis may not be as bad as recent media and some
> share-houses present. Reminds me of the bad press Apple computer was
getting
> in 96, as they slid into the red. OK - that may be drawing a long bow, but
> my money is still on Air NZ for a quicker and more sustainable recovery
than
> is predicted. The mechanisms are largely in place (management restructure,
> overhaul of engineering practices, fleet replacement, cultural
realignment),
> plus a number of associated revenue earners (including the P&W JV).
>
> They made mistakes during the transition...OK, I'll be honest - it was a
> mess. Leadership vacuum and one of the most difficult trading periods in
ten
> years. But we are seeing a major change in philosophy from the
> McCrea/Cushing era to the Toomey era. There are intangibles here which
have
> the potential to lift the groups performance (Toomey's more approachable
> leadership style and willingness to invest, which may unlock more of the
> potential residing within the expanded group). It has taken time (not
quick
> enough to stop CASA), but the building blocks are being put in place to
> unlock the synergies of integration and not only compete, but dominate.
> Also, don't discount the influence and cash power of SIA, working from
> behind the scenes. The same SIA who owns nearly half of Virgin Blue!
>
> In NZ, I suspect Air NZ will be able to compete with Virgin's no frills,
if
> and when, using Freedom.  Keeps the backpackers happy - not a money
spinner,
> but its about dominance. They're already ahead so far. The real battle
will
> be with Qantas, and for the business customers. At this stage, looks like
> Qantas' is mainly focused on main trunk routes, plus some provincials with
> Origin. Air NZ has a head start then, and a larger net and will compete
> head-on. They could afford to do some minor optimisation on the provincial
> routes to sew these up (the SAAB is a reliable work horse on existing
routes
> but they could do with 2 more, also more ATRs and focus on the shorter
main
> trunk routes, and focus the Beech 1900s on the short provincial routes).
> There is growth potential here. I hope the new 'Ventures' division are
> working on this already - the provincials were a bit slow off the mark
when
> Qantas NZ crashed. Oh, and remember that it was 'Qantas' who crashed!
>
> The real battle in Australia is against Qantas/Impulse (ex), where the
> corporate customers are. Hazelton offers valuable routes and schedules.
> Toomey's staff will be focused on completing the rationalisation of
> management initiatives (IT, downsizing, network planning, marketing -
> including some 'rebranding' to rebuild customer confidence and loyalty)
and
> regain market share.
>
> At the international level, the new groups focus has always been on
> Australasia, plus LA which is lucrative. Air NZ pulled out of Europe -
those
> routes are now covered by code-sharing through the Star Alliance.
>
> This talk about access to London as an offset for allowing Virgin into NZ
is
> a red herring. Virgin Blue cannot provide any offset to the UK, since it
is
> an Australian airline. Besides, the UK is not the group's strategic
focus -
> Australasia is. As a combined group, they have the routes and access to
make
> this hum, and its a growing market - especially if the similarities noted
> between the USA in the 1980s and Japan today prove substantial - watch
> Japan!
>
> It would be interesting to re-do Snoopy's analysis again soon (I liked the
> analysis, don't know that the loss will be that great, and in any event it
> will be the bottom).  Basically, Air NZ were knocked up against the ropes
> recently, but they're in this for the long haul, and I believe they are
> right now positioning for a good fight. Not to be overlooked.
>
> Disc (hold AIRVB)
>
> Greg Elliott
>
>  From: Bruce Withers <withers@xtra.co.nz>
> > Reply-To: sharechat@sharechat.co.nz
> > Date: Tue, 01 May 2001 21:00:37 +1200
> > To: sharechat@sharechat.co.nz
> > Subject: Re: [sharechat] Airline shares
> >
> > Re British Air Rights:
> > Heathrow is almost at gridlock...who wants to encourage more landings
from Air
> > NZ? Not in the Brits interest, so not an arguement for Virgin.
> >
> > Rgds
> >
> > Bruce
> >
> > "tennyson@caverock.net.nz" wrote:
> >
> >> Hi Peter,
> >>
> >> I enjoyed your wee rant on Airline shares.  But here are some of the
> >> counter view points, with particular regard to Air New Zealand.
> >>
> >>>
> >>> Airline in the news a lot  - what future for them? Will Air New
> >>> Zealand ever make money again?
> >>>
> >>> The orange Virgin 767 looks pretty impressive, and at home, sitting
> >>> on the tarmac at Wellington this afternoon.
> >>>
> >>
> >> And that may be the last we see of it.  It would seem Virgin are
> >> mainly interested in the trans- tasman route, with an Auckland
> >> Wellington Christchurch sweep stitched into the middle while they are
> >> here.  There is the tiny matter of international air rights to be
> >> negotiated.  And if Virgin are successful, it would seem that  Air
> >> New Zealand would get some compensation through better access to the
> >> British market.
> >>
> >>>
> >>> As said earlier AIRVA share price been trending down since 1993.
> >>>
> >>
> >> Air New Zealand is not really the same company any more.   It has
> >> gone from being a a niche fringe airline to a global sized player as
> >> it doubled in size.  I don't think you can take the past trend of
> >> AIRVA as a useful future predictor of the direction of AIR from here
> >> on.
> >>
> >>
> >>>
> >>> I have re-read the Unlimited story 'On a wing and a prayer'
> >>>
> >>> One part of the article that struck me was -
> >>> Andy Serwer wrote about
> >>> investment in airline stocks. "Never, I repeat, never buy
> >>> airlines," he said. His rationale was that airlines have the
> >>> cost structure from hell. To whit:
> >>>
> >>>
> >>> a.. They have to borrow huge sums of money to buy planes,
> >>> leaving them at the whim of interest rates (a factor totally
> >>> out of their control).
> >>>
> >>>
> >>
> >> Globally the world's equivalents of our Don Brash seem  to be doing
> >> what they can to keep interest rates low.  I don't see the return of
> >> 20% interest rates which sank some airlines in the mid 1980s.
> >>
> >>>
> >>>
> >>> b.. They use huge amounts of fuel, leaving them at the whim of
> >>> oil prices (a factor totally out of their control).
> >>>
> >>>
> >>
> >> As far as I can tell the bad news of rising fuel prices over the last
> >> year or so have already been built in to current airline share
> >> prices.   I feel it unlikely that the world's oil producing nations
> >> will drastically spike prices again in the foreseeable future.
> >>
> >>>
> >>>
> >>> c.. They are at the whim of strong unions
> >>> (you guessed it, a factor almost totally out of their
> >>> control).
> >>>
> >>>
> >>
> >> Air New Zealand would probably have a better employment record than
> >> say Qantas New Zealand or Kiwi Air.   If anything AIR are able to
> >> dictate the wages paid to their employees, not the other way around.
> >> There aren't too many other airline operators out there for
> >> disgruntled employees to move to.
> >>
> >>>
> >>>
> >>> d..
> >>> If, Serwer argues, some of the world's most serious investors -
> >>> including Warren Buffett with US Air - can lose big-time buying
> >>> into airlines, what hope is there for the rest of us?
> >>>
> >>>
> >>
> >> Buying into a US Airline in the USA is more akin to buying into a
> >> small shuttle bus company in New Zealand, rather than buying into Air
> >> New Zealand.
> >>
> >> US Air is a domestically focussed business.   There are few
> >> regulatory barriers to operating within the United States for a new
> >> airline start up.   On the other hand, an operator wishing to compete
> >> with Air New Zealand on international routes must negotiate
> >> international landing rights with the New Zealand Government (if a
> >> foreign airline) or with a foreign government (if New Zealand based).
> >>
> >> It could be argued that, Origin Pacific excepted, Air New Zealand is
> >> the only operator with a credible record of running a sustainable
> >> Airline business in our country's history.
> >>
> >>>
> >>>
> >>> Airline shares for me - no way
> >>>
> >>>
> >>
> >> I wouldn't buy 'Airline shares'(generic) either.   But that
> >> doesn't mean you can't have a successful investment if you
> >> selectively buy only the best 'Airline share'. SNOOPY
> >>
> >> disclosure:  Holds AIR
> >>
> >> ---------------------------------
> >> Message sent by Snoopy
> >> e-mail  tennyson@caverock.net.nz
> >> on Pegasus Mail version 2.55
> >> ----------------------------------
> >> "You can tell me I'm wrong twice,
> >> but that still only makes me wrong once."
> >>
>
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