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Air New Zealand Limited

Air New Zealand Limited. December 2000 Interim Result Presentation. Date : 20 February 2001. Result Overview. FY01 Interim Result Highlights. $m H1-01 H1-00 % Revenue 4,311.5 1,803.9 139.0 EBITDRA 578.4 316.9 82.5 Pre Tax Op (Deficit)/Surplus (1.1) 76.8 (101.5)

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Air New Zealand Limited

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  1. Air New Zealand Limited December 2000 Interim Result Presentation Date : 20 February 2001

  2. Result Overview

  3. FY01 Interim Result Highlights $m H1-01 H1-00 % Revenue 4,311.5 1,803.9 139.0 EBITDRA 578.4 316.9 82.5 Pre Tax Op (Deficit)/Surplus (1.1) 76.8 (101.5) Unusual Charges (31.8) 50.2 (163.3) Associates Contribution 7.2 51.9 (86.1) Tax Benefit (29.5) 51.6 (157.1) Net Profit After Tax: - Excl. Unusuals 24.8 83.4 (70.3) - Incl. Unusuals 3.8 127.2 (97.0) Cash flow from operations189.1 157.9 19.8

  4. Balance Sheet As at 31 Dec 00 30 Jun 00 % 31 Dec 99 Net Debt (m) 3,147.1 3,107.6 1.3 1,186.9 Gearing (%) 62.3 66.2 (5.9) 34.7 Gearing incl. Leases (%) 76.5 75.7 1.1 56.2 Return on Ave Equity (%) 0.4 8.3 (95.6) 11.7 NTA/Share 2.72 2.46 10.6 3.58 DPS (C) 4.0 9.0 n/a 6.0

  5. Results in Detail

  6. Results in Context • Obviously one of the most difficult trading periods experienced • Fuel Price at 10 year highs • NZD and AUD at all time lows against the USD • Increased competition on the Australian domestic market • Introduction of GST in Australia • Reduced Domestic travel in Australia due to Olympics • Increased competition and capacity on Tasman, Pacific and Atlantic • Some positives • International traffic during the Olympic period • FX benefits on the revenue side • Hedging gains (Fuel and FX) of NZ$110.7m • Other benefits • All whilst integration is occurring and without a C.E.O.

  7. Inbound Growth Continues, Outbound Recovering

  8. Australian Domestic Passenger Market Australian Passenger Growth: 2000 v. 1999 + 7.2% Jun-Nov 1999 Jun-Nov 2000

  9. Air New Zealand: International Airline(Excluding Tasman) H1-01 H1-00 % ASKs (m) 10,823 10,247 5.6 RPKs (m) 8,086 7,242 11.7 Passenger Load Factor (%) 74.7 70.7 5.7 Passenger Revenue ($m) 890.3 711.8 25.1 Yield/RPK 11.0 9.8 12.2

  10. Australasian Market(Including Aust & NZ Domestic Trunk and Regional, & Trans-Tasman) H1-01 H1-00* % ASKs (m) 14,320 13,377 7.0 RPKs (m) 10,324 9,825 5.1 Passenger Load Factor (%) 72.1 73.4 (1.8) Passenger Revenue ($m) 2,337.1 2,145.6 8.9 Yield/RPK 22.6 21.8 3.7 Yield includes benefit of NZ$ depreciation against AU$. Adjusting for thisbenefit, Yield/RPK is 21.7 (0.5% decrease) *Includes pro-forma Ansett Domestic results for H1-00

  11. Ansett International (49% owned) AU$ H1-01 H1-00 % change ASKs (m) 2,578 2,653 (2.8) RPKs (m) 1,859 1,975 (5.9) Passenger Load Factor (%) 72.1 74.4 (3.1) Passenger Revenue ($m) 146.8 141.1 4.0 Yield/RPK 7.9 7.1 11.3

  12. Revenue from Other Businesses Total Other Revenue of $1,084.1 million: • Cargo Revenue $319.4m • Contract Services Revenue $159.8m • Other Revenue - $604.9m • includes loyalty revenue, travel & tours revenue, in-flight sales etc

  13. Operating Expenditure by Category (11%) (10%) (23%) (12%) (11%) (20%) (15%)

  14. Operating Costs Impacted by Fuel & FX Costs exclude net interest, depreciation, amortisation, operating lease costs and abnormal items.

  15. Group Fuel Position (Including Ansett International) H1-01 H1-00* % Total Consumption (m gallons) 303.7 285.1 6.5 USc per Gallon 94 73 28.9 Total Cost (US$m) 285.9 208.3 37.3 Total Cost (NZ$m) 677.6 391.9 72.9 Includes savings from hedging of US$27.8m (NZ$74.4m) *Includes pro-forma Ansett for H1-00

  16. Integration • Savings to date lower than anticipated, however progress on: • Common IT platform • Procurement Savings • Management Reduction • Redundancies • Mainly management at this stage • TVSS still in progress • Full Year Forecast • Revenue projects will not deliver due to market conditions • Timing has been slower than first expected • Full range if initiatives being pursued

  17. Outlook

  18. Outlook Based on current trading conditions, the outlook for the second half is uncertain and there is potential for further deterioration in operating result in the short-term Building blocks in place for medium term improvement in profitability and creation of shareholder value

  19. Strategies

  20. G Frazis EGM Strategy Aust C Tremain GGM HR & Org Change NZ M Flanagan GGM AN/NZ Integration NZ Current Management Structure... Gary Toomey Managing Director & CEO NZ J Dell Chief Financial Officer A Paterson EGM Commercial T Jensen GGM Ops Technical I Diamond GGM Ops Services G Lilly GM Air NZ Int TBA EGM Australasia G Kingshott GM AN Int P Elmsly GM Cargo NZ NZ NZ Aust Aust NZ Aust Aust Aust B FitzgeraldGM Terminal Services A Miller GM Ansett Domestic N Thompson GM Air NZ Domestic/Trans Tas & SWP R Rosalky GM Aust Regional Airlines Aust B Jacobson GM ANNZES NZ Aust Aust L Doolan GGM Corp, Govt & Int Affairs NZ NZ

  21. Finance Corp, Govt & Int Affairs NZ HR & Org Change Strategy, Network & Marketing t New Structure... G Toomey Group President & CEO Ansett International 49% owned Sales & Distribution Customer Service Operations Worldwide Airport Svces NZ Focus on strategy development across markets, product, brand, loyalty, fleet, alliances & network integration, e-commerce Focus on customer service standards, delivery & consistency. Manages all cabin crew, inflight service staff & call centres (except regionals) Focus on revenue generation across brands & optimisation of yield, agency relat’s Integrates all operations. Manages all pilots (except regionals). Australian & NZ pilots remain in separate structures. Integrates all airport delivery. Contains aircraft provisioning NZ ANNZES Business Performance Enhancement Integrates business performance activities Ventures Focus on growth of Aust regional / NZ Link airlines & smaller enterprises.

  22. A Moroney CFO & SVP Finance NZ L Doolan SVP Corp, Govt & Int Affairs NZ C Tremain SVP HR & Org Change NZ G Frazis SVP Strategy, Network & Marketing Aust Executive Management G Toomey Group President & CEO Ansett International 49% owned A. Miller SVP Sales & Distribution L Grant SVP CustomerService T Jensen SVP Operations B Fitzgerald SVP Worldwide Airport Svces NZ Aust Aust Aust Aust B Jacobson SVPANNZES NZ TBA SVP Ventures NZ NZ K Turnbull SVP Business Performance Enhancement No Change Responsibilities Changed Somewhat New Role NZ

  23. Key Group Strategies Strategies are being formulated to improve performance in the medium term • Overall profit enhancement program • Complete network and fleet planning • Growing international operations • Protecting strong New Zealand position • New marketing plans • Improve total customer service levels • Brand positioning and simplification • Harness alliance benefits • Balance sheet management and funding All strategies will be underpinned with detailed financial plans with the end aim of creating value for shareholders.

  24. Strategies - Ansett Ansett, in particular, needs attention: • Address capacity deficiencies and deteriorating market share • Target sales growth through agents and corporates • Extensive punctuality review • Rebuild confidence in safety and reliability • Review Australian trunk and regional networks • Build accurate and reliable accounting and management reporting systems • Review product and positioning with new competition • Fleet replacement and rationalisation over time • Improve cost position

  25. Current Issues • Hazelton • Currently have acceptances for 78.5% • Still awaiting decision from the ACCC • Ansett Australia B767-200 Maintenance • All 7 aircraft now fully compliant • Maintenance Management Processes meet CASA Requirements • CASA general audit underway • DVT • Have not been formally approached on legal proceedings • Warsaw convention • Acted responsibly by issuing warnings on tickets and in-flight products • Targeted Voluntary Severance • Good response • Process is still underway and thus cannot give final data

  26. Air New Zealand Limited December 2000 Interim Result Presentation Date : 20 February 2001

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