Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

Guangzhou Baiyun International Airport / Equity Bottom-Up

Guangzhou Baiyun International Airport (600004 CH)

<p>Within the hospitality-affected complex, the airline industry garners the lion's share of the negative news from the Covid fall-out. The <a href="https://www.bloomberg.com/quote/280456Z:CN" target="_blank" rel="noopener">International Air Transport Association</a> said last month it estimates losses in 2021 of US$48bn, up from $38bn previously. And that's on top of an estimated $370bn of losses to the industry in FY20, <a href="https://www.icao.int/Newsroom/Pages/2020-passenger-totals-drop-60-percent-as-COVID19-assault-on-international-mobility-continues.aspx" target="_blank" rel="noopener">according</a> to the International Civil Aviation Organization.</p>
<p>But spare a thought for the airports which facilitate the arrival and departure of these airlines, as this crisis becomes increasingly protracted, and in many ways, deeper than many anticipated 18 months ago.</p>
<p>Amid the doom and gloom, there are parking bays of good news. April's domestic air passenger traffic in China was ~96% of December 2019 levels. <a href="https://www.smartkarma.com/entities/shenzhen-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:15522:1" rel="noopener">Shenzhen Airport Co A (000089 CH)</a> (SZAC) is at level pegging with <em>overall</em> traffic numbers in 2019, and domestic flow into SZAC, <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a>, and <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> all exceed 2019 levels. </p>
<p>Yet outside of the Chinese airport space, where international passenger throughput has historically commanded &gt;40%+ of total throughput - up to 80% for <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> -  the outlook remains subdued, and largely uncertain.</p>
<p>Just this week, Thailand recorded its highest level of Covid-related fatalities, Taiwan is facing its first serious outbreak, and Australia's state of Victoria entered its fourth lockdown. </p>
<p>Provided airports have sufficient funds to ride out the tough times to the other side of the valley, all will undergo a major re-rate when international travel restarts. Yet the vaccine rollout - and uptake - and when international borders will reopen, remain indeterminate.</p>
<div class="content-highlight">
<p><strong>What's Original?</strong></p>
<p>This insight presents a comprehensive view of the key Chinese airports (<a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital International Airport (BCIA) (694 HK)</a>, Shenzhen Airport, <a href="https://www.smartkarma.com/entities/shanghai-international-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:6511:1" rel="noopener">Shanghai International Airport (600009 CH)</a>, and <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a>, together with <a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a>, <a href="https://www.smartkarma.com/entities/malaysia-airports-hldgs-bhd" target="_blank" data-smartkarma-citation="entities:117:1" rel="noopener">Malaysia Airports Hldgs (MAHB MK)</a>, <a href="https://www.smartkarma.com/entities/japan-airport-terminal-co" target="_blank" data-smartkarma-citation="entities:18034:1" rel="noopener">Japan Airport Terminal Co (9706 JP)</a>, <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a> and <a href="https://www.smartkarma.com/entities/auckland-intl-airport-ltd" target="_blank" data-smartkarma-citation="entities:597:1" rel="noopener">Auckland Intl Airport (AIA NZ)</a>.</p>
</div>

Within the hospitality-affected complex, the airline industry garners the lion's share of the negative news from the Covid fall-out. The International Air Transport Association said last month it estimates losses in 2021 of US$48bn, up from $38bn previously. And that's on top of an estimated $370bn of losses to the industry in FY20, according to the International Civil Aviation Organization.
But spare a thought for the airports which facilitate the arrival and departure of these airlines, as this crisis becomes increasingly protracted, and in many ways, deeper than many anticipated 18 months ago.
Amid the doom and gloom, there are parking bays of good news. April's domestic air passenger traffic in China was ~96% of December 2019 levels. Shenzhen Airport Co A (000089 CH) (SZAC) is at level pegging with overall traffic numbers in 2019, and domestic flow into SZAC, Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport (600004 CH) all exceed 2019 levels. 
Yet outside of the Chinese airport space, where international passenger throughput has historically commanded &gt;40%+ of total throughput - up to 80% for Airports of Thailand (AOT TB) -  the outlook remains subdued, and largely uncertain.
Just this week, Thailand recorded its highest level of Covid-related fatalities, Taiwan is facing its first serious outbreak, and Australia's state of Victoria entered its fourth lockdown. 
Provided airports have sufficient funds to ride out the tough times to the other side of the valley, all will undergo a major re-rate when international travel restarts. Yet the vaccine rollout - and uptake - and when international borders will reopen, remain indeterminate.

What's Original?
This insight presents a comprehensive view of the key Chinese airports (Beijing Capital International Airport (BCIA) (694 HK), Shenzhen Airport, Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport (600004 CH), together with Airports of Thailand (AOT TB), Malaysia Airports Hldgs (MAHB MK), Japan Airport Terminal Co (9706 JP), Sydney Airport (SYD AU) and Auckland Intl Airport (AIA NZ).


Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<p>Interglobe Aviation (Indigo)’s board approved a fund raising of around US$400m (INR30,000m) on 10th May 2021. </p><p>This is the second time over the past year that the company has obtained a board approval for undertaking a fund raising. The previous instance was in Aug 2020, when the board approved a fundraising of up to INR40,000m. However, the quicker than expected recovery since then meant that the company never raised the funds and in Jan 2021, its CFO stated that it had no intention of doing so either.</p><p>However, the brutal COVID-19 second wave in India probably led to a change of heart. In this note, we will talk about the deal dynamics. </p>

Interglobe Aviation (Indigo)’s board approved a fund raising of around US$400m (INR30,000m) on 10th May 2021. This is the second time over the past year that the company has obtained a board approval for undertaking a fund raising. The previous instance was in Aug 2020, when the board approved a fundraising of up to INR40,000m. However, the quicker than expected recovery since then meant that the company never raised the funds and in Jan 2021, its CFO stated that it had no intention of doing so either.However, the brutal COVID-19 second wave in India probably led to a change of heart. In this note, we will talk about the deal dynamics. 

Interglobe Aviation (Indigo) QIP Early Look - Headwinds Lead to a Change of Heart

New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

<h2>Air New Zealand<br>Air's Bubble To Inflate Gradually</h2>
<div></div>
<p><strong>NEUTRAL</strong></p>
<p>Air New Zealand (AIR) is enjoying its first commercial international passenger services for over 12 months. The trans-Tasman bubble opening provides a welcome boost, but to date has been far from a bonanza. The opening sugar-rush of visiting friends and relatives (VFR) travellers has been dominated by New Zealand passport holders from both sides of the Tasman. Demand has since slowed, yet airline schedules suggest a gradual capacity build over the next few months. We expect AIR to still generate a material loss in 2H21 and to be loss-making through FY22. The outlook remains highly uncertain and a required capital raise still has to play out. We remain NEUTRAL but recognise AIR is trading towards the upper end of its trading band.&nbsp;</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/203/907/original/image_61881236321620001111691.png?1620001112" class="editor-image img-responsive" data-smartkarma-image-id="203907"></figure>
<div>
<h3>What's changed?&nbsp;</h3>
</div>
<div id="m_4551118814049325906iwrmo3">
<ul>
<li><strong>Earnings</strong>:&nbsp;Earnings upgrades to each of FY21, FY22 and FY23. Losses assumed in FY21 and FY22</li>
</ul>
</div>
<div>
<h3>Bubble boost</h3>
</div>
<div id="m_4551118814049325906imngk">
<p>AIR's international (available seat km) capacity has initially increased by ~+100% as a result of the opening of the trans-Tasman bubble. AIR will fly 19 Tasman routes between 13 airports. Forward schedules suggests a gradual capacity build over the next few months. Competition is currently limited to Qantas/Jetstar, with Virgin Australia not returning to the Tasman until October 2021, and fifth freedom carriers including Singapore Airlines, China Airlines and Emirates likely to be absent until broader border re-openings.&nbsp;</p>
</div>
<div>
<h3>Cash burn to continue&nbsp;</h3>
</div>
<div id="m_4551118814049325906ibyrr">
<p>Cash&nbsp;burn guidance, which was -NZ$45m to -NZ$55m&nbsp;per month through 2H21&nbsp;has been removed given the bubble opening. We expect an initial cash boost from working capital gains (forward ticket sales), but these will slow as the forward book matures and capacity builds. Consequently, cash burn is likely to resume and&nbsp;deteriorate through 1H22 given the resumption of PAYE payments.</p>
</div>
<div>
<h3>Valuation</h3>
</div>
<div id="m_4551118814049325906inc8h">
<p>AIR share price has been dogged despite the reality of capital raise to secure much needed equity and ultimately the company's longer term future. In light of the large retail investor base and government's majority stake we expect that investors willing to participate in the capital raise will not be diluted. Its current enterprise value (EV) is just -4% of what it was on 31 December 2019, despite the current loss-making outlook and significant uncertainty over the recovery profile and size of the aviation market in future. However, we are confident that AIR will enhance its competitive position as a result of COVID-19. It's now trading at a ~+70% premium to net asset value (as at 30 June 2021),but after adding our valuation for the airpoints loyalty scheme, is within range of our NZ$1.60 target price.&nbsp;</p>
</div>
<div>
<div>
<div><strong>Andy Bowley</strong></div>
<div><a href="mailto:andy.bowley@forsythbarr.co.nz" target="_blank" rel="noopener">andy.bowley@forsythbarr.co.nz</a></div>
<div>+64 4 495 8246</div>
<div></div>
</div>
</div>
<div>
<div>
<div><strong>Scott Anderson</strong></div>
<div><a href="mailto:scott.anderson@forsythbarr.co.nz" target="_blank" rel="noopener">scott.anderson@forsythbarr.co.<wbr>nz</a></div>
<div>+64 4 914 2219</div>
</div>
</div>

Air New Zealand Air's Bubble To Inflate Gradually

NEUTRAL
Air New Zealand (AIR) is enjoying its first commercial international passenger services for over 12 months. The trans-Tasman bubble opening provides a welcome boost, but to date has been far from a bonanza. The opening sugar-rush of visiting friends and relatives (VFR) travellers has been dominated by New Zealand passport holders from both sides of the Tasman. Demand has since slowed, yet airline schedules suggest a gradual capacity build over the next few months. We expect AIR to still generate a material loss in 2H21 and to be loss-making through FY22. The outlook remains highly uncertain and a required capital raise still has to play out. We remain NEUTRAL but recognise AIR is trading towards the upper end of its trading band.&nbsp;


What's changed?&nbsp;



Earnings:&nbsp;Earnings upgrades to each of FY21, FY22 and FY23. Losses assumed in FY21 and FY22



Bubble boost


AIR's international (available seat km) capacity has initially increased by ~+100% as a result of the opening of the trans-Tasman bubble. AIR will fly 19 Tasman routes between 13 airports. Forward schedules suggests a gradual capacity build over the next few months. Competition is currently limited to Qantas/Jetstar, with Virgin Australia not returning to the Tasman until October 2021, and fifth freedom carriers including Singapore Airlines, China Airlines and Emirates likely to be absent until broader border re-openings.&nbsp;


Cash burn to continue&nbsp;


Cash&nbsp;burn guidance, which was -NZ$45m to -NZ$55m&nbsp;per month through 2H21&nbsp;has been removed given the bubble opening. We expect an initial cash boost from working capital gains (forward ticket sales), but these will slow as the forward book matures and capacity builds. Consequently, cash burn is likely to resume and&nbsp;deteriorate through 1H22 given the resumption of PAYE payments.


Valuation


AIR share price has been dogged despite the reality of capital raise to secure much needed equity and ultimately the company's longer term future. In light of the large retail investor base and government's majority stake we expect that investors willing to participate in the capital raise will not be diluted. Its current enterprise value (EV) is just -4% of what it was on 31 December 2019, despite the current loss-making outlook and significant uncertainty over the recovery profile and size of the aviation market in future. However, we are confident that AIR will enhance its competitive position as a result of COVID-19. It's now trading at a ~+70% premium to net asset value (as at 30 June 2021),but after adding our valuation for the airpoints loyalty scheme, is within range of our NZ$1.60 target price.&nbsp;



Andy Bowley
andy.bowley@forsythbarr.co.nz
+64 4 495 8246





Scott Anderson
scott.anderson@forsythbarr.co.nz
+64 4 914 2219



Air New Zealand: Air's Bubble To Inflate Gradually

<h2>Transport Sector&nbsp;<br>​​​​​​​Blowing AIR (and AIA) into the Bubble</h2>
<p></p>
<div>
<p>The recent opening of the trans-Tasman bubble, vaccination progress, vaccine challenges, infection rate developments internationally, virus mutations, and evolving global border restrictions/requirements lead us to revisit our aviation recovery estimates. We continue to expect New Zealand’s international air travel market recovers&nbsp;to FY19 pax levels in FY26. Domestic air travel will continue to recover on a more rapid time-frame. We assume it recovers to FY19 levels in FY24. The aviation landscape is extremely dynamic, which means our forecasts come with a higher margin for error than usual. The wide gap between best and worst case scenarios mean we only plot our assumptions for a central course. Our revised model incorporates the development of the trans-Tasman bubble, potential bubble extensions, and varying risk profiles from origin and destination countries. We rate both Auckland Airport (AIA) and Air New Zealand (AIR) NEUTRAL, recognising that while both trade above our respective valuations, the trade-off between reopening sentiment and fundamentals may continue to be swayed by the former for the time being.&nbsp;&nbsp;​​​​​​​​​​​</p>
</div>
<div>
<h3>The trans-Tasman bubble</h3>
</div>
<div id="m_-5453151632252572199ikqui-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2">
<p>​​​​​​​Early pax data suggests the trans-Tasman bubble has commenced with modest demand. Pax excluding transits over the first week amounted to&nbsp;~32% of&nbsp;the equivalent period in FY19. This apparent subdued start reflects the short booking window, heightened traveller caution and the initial outbound only nature of pax. Airline capacity will build over the coming months with higher demand likely&nbsp;around school holidays and the ski season. There appears to be more initial demand from Australia than New Zealand, in part a reflection of our government’s “flyer&nbsp;beware” messaging. Current demand is dominated by the visiting friends and relatives cohort.&nbsp;&nbsp;</p>
</div>
<div>
<h3>Recovery beyond the bubble</h3>
</div>
<div id="m_-5453151632252572199ii4ei-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2">
<p>The are many variables that will dictate broader border openings beyond the bubble. Vaccination rates, the concept of “herd immunity”, international precedent and the global prevalence of COVID-19 will influence the nature and timing of re-opening, but ultimately the decision will be political. The “health first” approach taken to date by the New Zealand Government means wider border openings are unlikely in the absence of very high vaccine uptakes. We expect border re-openings to be gradual with a more scientific risk based framework accompanying the current binary "green" and "red" lanes approach.&nbsp;​​​​​​​</p>
</div>
<div>
<h3>Permanent hit to pax</h3>
</div>
<div id="m_-5453151632252572199i3n4l-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2">
<p>Added hassles, higher costs, and the apathy to travel among certain population cohorts means that propensity to fly will decline as a result of COVID-19. While pax levels will ultimately return to FY19 levels by FY26 on our estimates, total pax will be ~22% lower for international and ~18% lower for domestic compared to the level of pax suggested by historic trend growth had COVID-19 never happened. In contrast, the enterprise values (EV) of AIA and AIR are currently just -1% and -4% below that of 31 Dec 2019 respectively. Intuitively, we would expect a larger discount based on the vastly different fundamental outlooks for both companies relative to pre COVID-19 expectations. While we recognise both are trading towards the top end of their respective trading ranges, the battle between sentiment and fundamentals is far from over.&nbsp;</p>
</div>
<div>
<div>
<div><strong>Andy Bowley</strong></div>
<div><a href="mailto:andy.bowley@forsythbarr.co.nz" target="_blank" rel="noopener">andy.bowley@forsythbarr.co.nz</a></div>
<div>+64 4 495 8246</div>
<div></div>
</div>
</div>
<div>
<div>
<div><strong>Scott Anderson</strong></div>
<div><a href="mailto:scott.anderson@forsythbarr.co.nz" target="_blank" rel="noopener">scott.anderson@forsythbarr.co.<wbr>nz</a></div>
<div>+64 4 914 2219</div>
</div>
</div>

Transport Sector&nbsp; ​​​​​​​Blowing AIR (and AIA) into the Bubble


The recent opening of the trans-Tasman bubble, vaccination progress, vaccine challenges, infection rate developments internationally, virus mutations, and evolving global border restrictions/requirements lead us to revisit our aviation recovery estimates. We continue to expect New Zealand’s international air travel market recovers&nbsp;to FY19 pax levels in FY26. Domestic air travel will continue to recover on a more rapid time-frame. We assume it recovers to FY19 levels in FY24. The aviation landscape is extremely dynamic, which means our forecasts come with a higher margin for error than usual. The wide gap between best and worst case scenarios mean we only plot our assumptions for a central course. Our revised model incorporates the development of the trans-Tasman bubble, potential bubble extensions, and varying risk profiles from origin and destination countries. We rate both Auckland Airport (AIA) and Air New Zealand (AIR) NEUTRAL, recognising that while both trade above our respective valuations, the trade-off between reopening sentiment and fundamentals may continue to be swayed by the former for the time being.&nbsp;&nbsp;​​​​​​​​​​​


The trans-Tasman bubble


​​​​​​​Early pax data suggests the trans-Tasman bubble has commenced with modest demand. Pax excluding transits over the first week amounted to&nbsp;~32% of&nbsp;the equivalent period in FY19. This apparent subdued start reflects the short booking window, heightened traveller caution and the initial outbound only nature of pax. Airline capacity will build over the coming months with higher demand likely&nbsp;around school holidays and the ski season. There appears to be more initial demand from Australia than New Zealand, in part a reflection of our government’s “flyer&nbsp;beware” messaging. Current demand is dominated by the visiting friends and relatives cohort.&nbsp;&nbsp;


Recovery beyond the bubble


The are many variables that will dictate broader border openings beyond the bubble. Vaccination rates, the concept of “herd immunity”, international precedent and the global prevalence of COVID-19 will influence the nature and timing of re-opening, but ultimately the decision will be political. The “health first” approach taken to date by the New Zealand Government means wider border openings are unlikely in the absence of very high vaccine uptakes. We expect border re-openings to be gradual with a more scientific risk based framework accompanying the current binary "green" and "red" lanes approach.&nbsp;​​​​​​​


Permanent hit to pax


Added hassles, higher costs, and the apathy to travel among certain population cohorts means that propensity to fly will decline as a result of COVID-19. While pax levels will ultimately return to FY19 levels by FY26 on our estimates, total pax will be ~22% lower for international and ~18% lower for domestic compared to the level of pax suggested by historic trend growth had COVID-19 never happened. In contrast, the enterprise values (EV) of AIA and AIR are currently just -1% and -4% below that of 31 Dec 2019 respectively. Intuitively, we would expect a larger discount based on the vastly different fundamental outlooks for both companies relative to pre COVID-19 expectations. While we recognise both are trading towards the top end of their respective trading ranges, the battle between sentiment and fundamentals is far from over.&nbsp;



Andy Bowley
andy.bowley@forsythbarr.co.nz
+64 4 495 8246





Scott Anderson
scott.anderson@forsythbarr.co.nz
+64 4 914 2219



Transport Sector: ​​​​​​​ Blowing AIR (And AIA) Into the Bubble

<h2>Air New Zealand<br>Capital Raise Deferred</h2>
<p>Air New Zealand’s (AIR) capital raise will now be undertaken before 30 September 2021, as opposed to before 30 June 2021 as previously outlined. The delay will provide more accuracy around the size of the raise and will reduce the risk of under-funding, in our opinion. AIR’s immediate capital needs are more than accounted for in the revised terms of the government funding facility.</p>
<p><strong>Revised terms of government funding facility</strong></p>
<p>The extended timeframe for the capital raise has resulted in a renegotiation of the Government’s funding facility, on far more favourable terms to AIR. The facility size increases to a total of NZ$1.5bn (from NZ$900m) with pricing (above the bank bill benchmark rate; currently ~0.3%) of 3.5% for the first NZ$1bn, compared to an effective rate of 7%-8% that AIR is currently paying. AIR has drawn-down NZ$350m of the current facility having made no further facility drawdowns since 25 February 2021. The increase in the total facility size reflects the need to ensure AIR as a going concern at FY21 year end. &nbsp;</p>
<p>The Government remains committed to retaining a majority shareholding in AIR upon completion of the capital raise.</p>
<p><strong>Improved cash burn</strong></p>
<p>AIR’s cash burn guidance was removed earlier this week given the Trans-Tasman bubble announcement. Given the likely significant working capital movements with new forward bookings, AIR’s cash burn will, at least temporarily, improve substantially.</p>
<p><strong>Our view</strong></p>
<p>We remain NEUTRAL on AIR. The recent share price lift around the Trans-Tasman bubble announcement appears modestly over-done relative to the potential benefit to forward net asset value (NAV) estimates. &nbsp;</p>
<p><strong>Andy Bowley&nbsp;</strong><br>Head of Research</p>
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1696510696687908827&amp;th=178b377d79bbb7db&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-7fFBarQSnfVvLUPaWgEzAlLzmZwhof62PqY1JIvWSRtAphi1lRRNg5_Ngtrt1TTR_gi8l9C5JM-R4QxAp7VBoLg87E7le4M4FULtZReMeFPlUrijHuh_7G5I&amp;disp=emb" class="editor-image img-responsive"></figure>
<p><br>M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp;<br>Level 22, NTT Tower, 157 Lambton Quay, Wellington</p>

Air New Zealand Capital Raise Deferred
Air New Zealand’s (AIR) capital raise will now be undertaken before 30 September 2021, as opposed to before 30 June 2021 as previously outlined. The delay will provide more accuracy around the size of the raise and will reduce the risk of under-funding, in our opinion. AIR’s immediate capital needs are more than accounted for in the revised terms of the government funding facility.
Revised terms of government funding facility
The extended timeframe for the capital raise has resulted in a renegotiation of the Government’s funding facility, on far more favourable terms to AIR. The facility size increases to a total of NZ$1.5bn (from NZ$900m) with pricing (above the bank bill benchmark rate; currently ~0.3%) of 3.5% for the first NZ$1bn, compared to an effective rate of 7%-8% that AIR is currently paying. AIR has drawn-down NZ$350m of the current facility having made no further facility drawdowns since 25 February 2021. The increase in the total facility size reflects the need to ensure AIR as a going concern at FY21 year end. &nbsp;
The Government remains committed to retaining a majority shareholding in AIR upon completion of the capital raise.
Improved cash burn
AIR’s cash burn guidance was removed earlier this week given the Trans-Tasman bubble announcement. Given the likely significant working capital movements with new forward bookings, AIR’s cash burn will, at least temporarily, improve substantially.
Our view
We remain NEUTRAL on AIR. The recent share price lift around the Trans-Tasman bubble announcement appears modestly over-done relative to the potential benefit to forward net asset value (NAV) estimates. &nbsp;
Andy Bowley&nbsp; Head of Research

 M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

New Zealand

Air New Zealand Limited operates an airline business that provides international and domestic air passenger and cargo transport services throughout New Zealand and the South West Pacific. The Company also provides engineering and ground handling services.

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Air New Zealand (AIR NZ)

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Asia-Pac Airports: Ups, But Mostly Downs

Domestic passenger flow into Shenzhen Airport (000089 CH), Shanghai International Airport (600009 CH), and Guangzhou Baiyun International Airport...

David Blennerhassett

Interglobe Aviation (Indigo) QIP Early Look - Headwinds Lead to a Change of Heart

Interglobe Aviation (Indigo)’s board approved a fund raising of around US$400m on 10th May 2021. This is the second time over the past year that...

Sumeet Singh

Air New Zealand: Air's Bubble To Inflate Gradually

Air New ZealandAir's Bubble To Inflate Gradually NEUTRAL Air New Zealand (AIR) is enjoying its first commercial international passenger services...

Forsyth Barr

Transport Sector: ​​​​​​​ Blowing AIR (And AIA) Into the Bubble

Transport Sector ​​​​​​​Blowing AIR (and AIA) into the Bubble The recent opening of the trans-Tasman bubble, vaccination progress, vaccine...

Forsyth Barr

Air New Zealand: Capital Raise Deferred

Air New ZealandCapital Raise Deferred Air New Zealand’s (AIR) capital raise will now be undertaken before 30 September 2021, as opposed to before...

Forsyth Barr

Transport Sector: Blowing AIR (And AIA) Into the Bubble

Transport Sector Blowing AIR (and AIA) into the Bubble The recent opening of the trans-Tasman bubble, vaccination progress, vaccine...