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.

Equity Bottom-Up

<ul><li>Air New Zealand (AIR) will report a material fall in earnings in its 1H24 result on 22 February 2024.</li><li>Management guidance is for PBT at the bottom end of its NZ$180m–NZ$230m range.</li><li>We forecast PBT of NZ$183m, down -39% against the prior year. The quality of the result will be compromised by the inclusion of ~NZ$45m of income connected to expired COVID-related credits.</li></ul>

Air New Zealand (AIR) will report a material fall in earnings in its 1H24 result on 22 February 2024.Management guidance is for PBT at the bottom end of its NZ$180m–NZ$230m range.We forecast PBT of NZ$183m, down -39% against the prior year. The quality of the result will be compromised by the inclusion of ~NZ$45m of income connected to expired COVID-related credits.

Air New Zealand - 1H24 Preview — Descending

Thematic (Sector/Industry)

<ul><li>A deteriorating economic backdrop is impacting demand for freight and passengers.</li><li>Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption.</li><li>The latter has softened demand across different transport modes. </li></ul>

A deteriorating economic backdrop is impacting demand for freight and passengers.Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption.The latter has softened demand across different transport modes. 

Transport Trends - Where's the Freight, Mate?

<ul><li>The headwinds in front of Air New Zealand (AIR) are strengthening.</li><li>Management has downgraded market earnings expectations again in light of weakening demand across its domestic and trans-Tasman business.</li><li>Long-haul has been largely immune to date, but given steadily recovering market capacity we expect a weaker long-haul story to emerge over the next six to 12 months, particularly from New Zealand outbound travellers. </li></ul>

The headwinds in front of Air New Zealand (AIR) are strengthening.Management has downgraded market earnings expectations again in light of weakening demand across its domestic and trans-Tasman business.Long-haul has been largely immune to date, but given steadily recovering market capacity we expect a weaker long-haul story to emerge over the next six to 12 months, particularly from New Zealand outbound travellers. 

Air New Zealand - Lacks Pax, Downgrade to UNDERPERFORM

<ul><li>The strong bounce in Air New Zealand's (AIR) post-COVID earnings is subsiding. FY24 earnings are likely to be materially lower than FY23.</li><li>The recent first time 1H24 earnings guidance points to margin decline driven by moderating yields, lower domestic load factors, higher fuel costs, and sustained labour inflation.</li><li>AIR refers to softening domestic demand, which we expect to seep into international over the course of FY24, given increasing competition and a weakening consumer backdrop. </li></ul>

The strong bounce in Air New Zealand's (AIR) post-COVID earnings is subsiding. FY24 earnings are likely to be materially lower than FY23.The recent first time 1H24 earnings guidance points to margin decline driven by moderating yields, lower domestic load factors, higher fuel costs, and sustained labour inflation.AIR refers to softening domestic demand, which we expect to seep into international over the course of FY24, given increasing competition and a weakening consumer backdrop. 

<ul><li>Air New Zealand (AIR) reported a strong FY23 result, boosted by record passenger yields. It was far from a normal year, AIR fairly labels it an "extraordinary operating environment"; consequently, the result offers few signals as to profit levels for the year ahead.</li><li>The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.</li><li>We expect this differential to allow AIR to generate an attractive ROIC in FY24, but lower than FY23, and heading back towards WACC over the medium-term. Trading at ~8x one year forward PE, AIR continues to trade at a material premium (~25%) to Tasman peer Qantas (QAN.AX). ​​​​​​​NEUTRAL.</li></ul>

Air New Zealand (AIR) reported a strong FY23 result, boosted by record passenger yields. It was far from a normal year, AIR fairly labels it an "extraordinary operating environment"; consequently, the result offers few signals as to profit levels for the year ahead.The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.We expect this differential to allow AIR to generate an attractive ROIC in FY24, but lower than FY23, and heading back towards WACC over the medium-term. Trading at ~8x one year forward PE, AIR continues to trade at a material premium (~25%) to Tasman peer Qantas (QAN.AX). ​​​​​​​NEUTRAL.

Air New Zealand - FY23 — Steep Ascent, Descending to Lower Altitude

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)

Air New Zealand - 1H24 Preview — Descending

Air New Zealand (AIR) will report a material fall in earnings in its 1H24 result on 22 February 2024. Management guidance is for PBT at the bottom...

Forsyth Barr

Transport Trends - Where's the Freight, Mate?

Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption. The latter has softened...

Forsyth Barr

Air New Zealand - Lacks Pax, Downgrade to UNDERPERFORM

The headwinds in front of Air New Zealand (AIR) are strengthening. Management has downgraded market earnings expectations again in light of...

Forsyth Barr

Air New Zealand - Lower Flight Path

The strong bounce in Air New Zealand's (AIR) post-COVID earnings is subsiding. FY24 earnings are likely to be materially lower than FY23. The...

Forsyth Barr

Air New Zealand - FY23 — Steep Ascent, Descending to Lower Altitude

The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.

Forsyth Barr

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