Air New Zealand Limited
December 2000 Interim Result Presentation
Date : 20 February 2001
Result Overview
1
FY01 Interim Result Highlights
$m Revenue EBITDRA Pre Tax Op (Deficit)/Surplus Unusual Charges Associates Contribution Tax Benefit Net Profit After Tax: - Excl. Unusuals - Incl. Unusuals 24.8 3.8 83.4 127.2 (70.3) (97.0) H1-01 4,311.5 578.4 (1.1) (31.8) 7.2 (29.5) H1-00 1,803.9 316.9 76.8 50.2 51.9 51.6 % 139.0 82.5 (101.5) (163.3) (86.1) (157.1)
Cash flow from operations
189.1
157.9
19.8
2
Balance Sheet
As at Net Debt (m) Gearing (%) Gearing incl. Leases (%) Return on Ave Equity (%) NTA/Share DPS (C) 31 Dec 00 3,147.1 62.3 76.5 0.4 2.72 4.0 30 Jun 00 3,107.6 66.2 75.7 8.3 2.46 9.0 % 1.3 (5.9) 1.1 (95.6) 10.6 n/a 31 Dec 99 1,186.9 34.7 56.2 11.7 3.58 6.0
3
Results in Detail
4
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$110.7m Other benefits
•
All whilst integration is occurring and without a C.E.O.
5
Inbound Growth Continues, Outbound Recovering
15
Annual Growth Rate (%)
10 5 0 -5 -10
Jun-98
NZ Arrivals
Sep-98
Dec-98
Aust Arrivals
Mar-99
Jun-99
Sep-99
NZ Outbound
Dec-99
Mar-00
Aust Outbound
6
Jun-00
Sep-00
Dec-00
Australian Domestic Passenger Market
Australian Passenger Growth: 2000 v. 1999
15,000,000
+ 7.2%
10,000,000
5,000,000
Jun-Nov 1999 Jun-Nov 2000
0
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Air New Zealand: International Airline
(Excluding Tasman)
H1-01
ASKs (m) RPKs (m) Passenger Load Factor (%) Passenger Revenue ($m) Yield/RPK 10,823 8,086 74.7 890.3 11.0
H1-00
10,247 7,242 70.7 711.8 9.8
%
5.6 11.7 5.7 25.1 12.2
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Australasian Market
(Including Aust & NZ Domestic Trunk and Regional, & Trans-Tasman)
H1-01
ASKs (m) RPKs (m) Passenger Load Factor (%) Passenger Revenue ($m) Yield/RPK 14,320 10,324 72.1 2,337.1 22.6
H1-00*
13,377 9,825 73.4 2,145.6 21.8
%
7.0 5.1 (1.8) 8.9 3.7
Yield includes benefit of NZ$ depreciation against AU$. Adjusting for thisbenefit, Yield/RPK is 21.7 (0.5% decrease)
*Includes pro-forma Ansett Domestic results for H1-00
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Ansett International (49% owned)
AU$
ASKs (m) RPKs (m) Passenger Load Factor (%) Passenger Revenue ($m) Yield/RPK
H1-01
2,578 1,859 72.1 146.8 7.9
H1-00
2,653 1,975 74.4 141.1 7.1
% change
(2.8) (5.9) (3.1) 4.0 11.3
10
Revenue from Other Businesses
Total Other Revenue of $1,084.1 million: • • • Cargo Revenue $319.4m Contract Services Revenue $159.8m Other Revenue - $604.9m
— includes loyalty revenue, travel & tours revenue, in-flight sales etc
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Operating Expenditure by Category
Pax Services 8% Aircraft & Traffic (11%) 8%
(10%)
Labour 28%
(23%)
Maintenance & Overhaul 9%
(12%)
Other 12%
(11%)
Fuel 17%
(15%)
Sales & Marketing 18%
(20%)
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Operating Costs Impacted by Fuel & FX
16 14.8 14.3 13.7
Cents/ASK
14
12
10 Op Cost/ASK Op Cost/ASK Excl Op Cost/ASK Excl Fuel Price Variance Fuel & FX Variances
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Costs exclude net interest, depreciation, amortisation, operating lease costs and abnormal items.
Group Fuel Position
(Including Ansett International)
H1-01
Total Consumption (m gallons) USc per Gallon Total Cost (US$m) Total Cost (NZ$m) 303.7 94 285.9 677.6
H1-00*
285.1 73 208.3 391.9
%
6.5 28.9 37.3 72.9
Includes savings from hedging of US$27.8m (NZ$74.4m)
*Includes pro-forma Ansett for H1-00
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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
15
Outlook
16
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
17
Strategies
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Current Management Structure...
Gary Toomey
Managing Director & CEO
NZ
A Paterson J Dell
T Jensen
I Diamond
G Lilly
TBA
Chief Financial Officer
NZ
EGM Commercial
Aust
GGM Ops Technical
Aust
G Kingshott
P Elmsly
GGM Ops Services
NZ
GM Air NZ Int
NZ
EGM Australasia
Aust Aust
GM AN Int
Aust
GM Cargo
NZ
G Frazis
B Fitzgerald
Aust
EGM Strategy
A Miller C Tremain N Thompson R Rosalky
GM Terminal Services
Aust
GGM HR & Org Change
NZ
GM Ansett Domestic
Aust
GM Air NZ Domestic/Tr ans Tas & SWP NZ
GM Aust Regional Airlines
Aust
B Jacobson
L Doolan
GGM Corp, Govt & Int Affairs NZ
M Flanagan
GM ANNZES
NZ
GGM AN/NZ Integration
NZ
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New Structure...
G Toomey
Group President & CEO
Ansett International
49% owned
Finance
NZ
Sales & Distribution Focus on strategy development across markets, product, brand, loyalty, fleet, alliances & network integration, ecommerce
Customer Service
Operations
Worldwide Airport Svces
Strategy, Network & Marketing
t
Focus on revenue generation across brands & optimisation of yield, agency relat’s
Corp, Govt & Int Affairs
NZ
NZ
Focus on customer service standards, delivery & consistency. Manages all cabin crew, inflight service staff & call centres (except regionals)
Integrates all operations. Manages all pilots (except regionals). Australian & NZ pilots remain in separate structures.
Integrates all airport delivery. Contains aircraft provisioning
ANNZES
Business Performance Enhancement
Integrates business performance activities Focus on growth of Aust regional / NZ Link airlines & smaller enterprises. Ventures
HR & Org Change
20
Executive Management
A Moroney CFO & SVP NZ Finance NZ G Frazis SVP Strategy, Network & Marketing
Aust
G Toomey
Group President & CEO
Ansett International
49% owned
A. Miller SVP Sales & Distribution
Aust
L Grant SVP Customer Service
Aust
T Jensen SVP Operations
Aust
B Fitzgerald SVP Worldwide Airport Svces Aust B Jacobson SVP ANNZES
NZ
NZ
L Doolan SVP Corp, Govt & Int Affairs
TBA SVP Ventures
NZ NZ
K Turnbull SVP Business Performance Enhancement C Tremain SVP HR & Org Change
NZ
No Change Responsibilities Changed Somewhat New Role
NZ
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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.
22
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
23
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
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Air New Zealand Limited
December 2000 Interim Result Presentation
Date : 20 February 2001