New Zealand Professional Investment Services Firm

Forsyth Barr

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.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Air New Zealand En Route to Recovery</h2>
This is the first time since the COVID-19 pandemic first arrived that we’ve commented on Air New Zealand’s (AIR) monthly passenger (pax) operating stats and for good reason. AIR is now firmly in recovery mode. Our estimate (~NZ$204m) of its April 2022 pax revenue is the highest since borders were closed in March 2020. We estimate that pax revenue has now recovered to ~49% of CY19 levels in April 2022, up from ~28% in March 2022. At the peak of the trans-Tasman bubble in 2021, pax revenue reached ~46% of CY19 levels on our estimates.
<ul>
<li>Revenue: We calculate that April 2022 passenger revenue growth was ~-51% compared to April 2019. While short haul (including domestic) revenue recovered to ~67% of CY19 levels in April 2022, long haul was only at ~22%.</li>
<li>RASK (revenue per available seat km): April 2022 group RASK was up +21% against CY19 albeit heavily influenced by mix given the stronger recovery to-date in higher RASK domestic services. Long haul RASK is up +9% pre-COVID with yield (revenue per passenger revenue km) up +5%.&nbsp;</li>
<li>Capacity: April 2022 total capacity was 36% of CY19 levels, with domestic services at 85%, short haul international at 40% and long haul at 21%.</li>
</ul>
Our view
April’s passenger revenue shows a strong sequential improvement from March and February, as the New Zealand Government has progressively relaxed border controls. We expect further improvements in pax revenue over the coming months as border restrictions continue to ease and AIR’s capacity improves.
Visible Alpha consensus has AIR’s pax revenue in FY22 at NZ$1,260m (Forsyth Barr: NZ$1,444m) of total revenue of NZ$2,389m. Our FY22-to-date revenue estimate suggests that consensus now assumes that AIR will generate pax revenue of NZ$3.7m per day through May and June. In contrast it generated NZ$7.3m per day in April. While we recognise that May and June are typically seasonally weaker revenue months, we believe that&nbsp;consensus appears to be materially under-estimating the strength of the pax recovery to-date. Current FY22 PBT consensus of -NZ$785m is consistent with management’s guidance for a PBT loss of less than –NZ$800m, but may need to upgrade (to a lower loss) in light of strengthening pax demand. &nbsp;
Chart: Average daily pax revenue in April was back to ~49% of CY19
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/278/870/original/image_17026280521654138616362.png?1654138618" class="editor-image img-responsive" data-smartkarma-image-id="278870"></figure>
Source: AIR, Forsyth Barr analysis&nbsp; Note: Months are based on the number of days AIR uses for accounting purposes, typically either 28 or 35 days

Air New Zealand En Route to Recovery
This is the first time since the COVID-19 pandemic first arrived that we’ve commented on Air New Zealand’s (AIR) monthly passenger (pax) operating stats and for good reason. AIR is now firmly in recovery mode. Our estimate (~NZ$204m) of its April 2022 pax revenue is the highest since borders were closed in March 2020. We estimate that pax revenue has now recovered to ~49% of CY19 levels in April 2022, up from ~28% in March 2022. At the peak of the trans-Tasman bubble in 2021, pax revenue reached ~46% of CY19 levels on our estimates.

Revenue: We calculate that April 2022 passenger revenue growth was ~-51% compared to April 2019. While short haul (including domestic) revenue recovered to ~67% of CY19 levels in April 2022, long haul was only at ~22%.
RASK (revenue per available seat km): April 2022 group RASK was up +21% against CY19 albeit heavily influenced by mix given the stronger recovery to-date in higher RASK domestic services. Long haul RASK is up +9% pre-COVID with yield (revenue per passenger revenue km) up +5%.&nbsp;
Capacity: April 2022 total capacity was 36% of CY19 levels, with domestic services at 85%, short haul international at 40% and long haul at 21%.

Our view
April’s passenger revenue shows a strong sequential improvement from March and February, as the New Zealand Government has progressively relaxed border controls. We expect further improvements in pax revenue over the coming months as border restrictions continue to ease and AIR’s capacity improves.
Visible Alpha consensus has AIR’s pax revenue in FY22 at NZ$1,260m (Forsyth Barr: NZ$1,444m) of total revenue of NZ$2,389m. Our FY22-to-date revenue estimate suggests that consensus now assumes that AIR will generate pax revenue of NZ$3.7m per day through May and June. In contrast it generated NZ$7.3m per day in April. While we recognise that May and June are typically seasonally weaker revenue months, we believe that&nbsp;consensus appears to be materially under-estimating the strength of the pax recovery to-date. Current FY22 PBT consensus of -NZ$785m is consistent with management’s guidance for a PBT loss of less than –NZ$800m, but may need to upgrade (to a lower loss) in light of strengthening pax demand. &nbsp;
Chart: Average daily pax revenue in April was back to ~49% of CY19

Source: AIR, Forsyth Barr analysis&nbsp; Note: Months are based on the number of days AIR uses for accounting purposes, typically either 28 or 35 days

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