South Pac Share and Oil Price Weekly Update

    Each week the Blue Swan Daily brings you a snap shot of the key share and oil prices related to all things travel and aviation.

    Qantas CEO Alan Joyce recently discussed how the carrier has been a strong performing airline over the past 12 months: “We were the best-performing ASX 100 stock in the last three years and in the last year”, he said, adding: “We’re the best performing airline stock for the past year. So shareholders who bought in a couple of years ago as part of the turnaround have done exceptionally well”. On why the carrier’s turnaround was successful, Mr Joyce said: “The secret of our turnaround was that it wasn’t just happening as a top-down programme… We identified what we needed to do in terms of the AUD2 billion target and where we needed to get the balance sheet to”. He also noted the importance of people to the carrier’s success. “We gave our people the power to make the turnaround… It was the 30,000 people at Qantas who came up with 250 different projects and figured how we implement them. A lot of people make the mistake of coming up with great ideas, but the implementation falls apart”. On the key of employee engagement, Mr Joyce said: “Get them engaged and get them to see the light at the end of the tunnel… We did make 5000 people redundant at the start of the programme. There were a lot changes that were just structurally problematic, like call centres; heavy maintenance bases because we had too many of them. But in the past year there have been huge benefits to the employee base; we’ve actually recruited nearly 1000 people because we’ve grown”.

    Air New Zealand chairman Antony Carter said the carrier is “fundamentally in a very strong position”, with cash holdings of NZD1.4 billion (USD1 billion) and gearing at 51.8%, which is within the target range of 45% to 55%. According to Mr Carter, as the carrier enters the last phase of its multi‐year fleet investment programme, it continue to expect the balance sheet to remain “robust”. CEO Christopher Luxon reported that based on market dynamics for the coming year, there are “targeted areas” where Air New Zealand will be growing:

    • Overall network: Capacity to grow by 4%-6%. This is a “continuation of a network strategy that plays to our strengths” said Mr Luxon. Air New Zealand is “making great progress in building new and existing markets and driving profitable growth everywhere in our network” said Mr Luxon, which is supported by the “fuel efficient and simplified fleet”;
    • Domestic network is a “key pillar of our strategy”, with capacity to grow by 4%-6%, which will be driven by “continued strong demand” to Queenstown, Christchurch and Dunedin, as well as additional frequencies into some regional markets. Tourism in New Zealand is in “great shape”, generating NZD14.5 billion (USD10.5 billion) in export earnings and in 2017 annual visitor arrivals surpassed the 3.6 million;
    • Tasman and Pacific Islands network to grow between 8% to 10%. Tasman growth will include more widebody operations, which links to the carrier’s Australian strategy to link North and South America via Auckland;
    • Pacific Islands network is planned to grow between 15% and 20%, driven by increased frequencies to Honolulu and Bali, which have been “incredibly popular with our customers”. It also includes more widebody flying on routes such as Samoa and Fiji;
    • Long haul international network growth of 3% to 5%. Two thirds of growth will be generated from the introduction of a new service to Tokyo Haneda, launched in Jul-2017. Mr Luxon said Air New Zealand has a strong focus on strategically growing the Japanese market, with the Haneda service complementing the existing Tokyo Narita route. The remaining capacity growth will consist of increased flying to North and South America over the summer season.


    Monthly Snapshot:

    18-Aug 25-Aug 01-Sep 08-Sep 15-Sep 22-Sep 29-Sep
    Qantas Airways $5.70 $6.02 $5.70 $5.65 $5.82 $5.80 $5.83
    Virgin Australia $0.21 $0.20 $0.19 $0.19 $0.18 $0.19 $0.19
    Air New Zealand $3.11 $3.25 $3.24 $3.15 $2.96 $2.98 $3.07
    Regional Express $1.07 $1.09 $1.22 $1.24 $1.31 $1.38 $1.42
    Alliance Airways $1.15 $1.21 $1.14 $1.20 $1.21 $1.18 $1.22
    Source: CAPA – Centre for Aviation and ASX


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