By Jenny Ruth
Thursday 20th January 2011
|Text too small?|
The trans-Tasman strategic alliance between Air New Zealand and Virgin Blue is a major positive for both airlines, says Rob Mercer at Forsyth Barr.
"We believe the alliance to be one of the most significant initiatives for Air New Zealand because it strengthens its competitive position in Australasia and finally gives it access, via Virgin Blue, to the Australian domestic market," Mercer says.
His early assessment is that the alliance will boost Air New Zealand's base annual earnings before interest and tax (EBIT) by between $15 million and $35 million. "The importance of the alliance is to increase Air New Zealand's return on capital across the cycle and potentially reduce its earnings volatility," he says.
As a result, Mercer has raised his forecast EBIT for the year ending June 2012 by $10 million to $400 million and his forecast for the following year by $26.5 million to $413 million. He has also raised his valuation to $1.98 a share from $1.82.
Other factors contributing to the airline's positive earnings outlook are further growth from long-haul visitor arrivals over the next few years, the introduction of new aircraft - B777-300 on long-haul flights and the A320s on New Zealand domestic routes - and the Rugby World Cup, he says.
No comments yet
Air NZ plans to raise stake in Virgin Australia to 25.9 percent after gaining approvals
Air NZ keeps balance sheet plump, holds back on dividends as fleet renewal looms
Air New Zealand plans to close Auckland maintenance facility, cut 180 jobs, union says
Air NZ's Safe Air unit cuts 84 jobs in Blenheim as contracts end
Air NZ agrees to settle cartel case, expects earnings at upper end of guidance
Air NZ lifts stake in Virgin Australia to 23 percent , may creep up to 26 percent
Air NZ backs down on challenge to cargo suit against regulator
Air New Zealand reviews Japan flights as decline in yen makes travel more expensive
Ex-Foodstuffs boss Carter to head up Air NZ board
Air NZ shares jump 5.6 percent as airline flags annual earnings to more than double