New Zealand’s national carrier Air New Zealand (ASX:AIZ) released its traffic figures for August which showed healthy growth across most divisions.
Total passengers increased to 1.13m during the month of August which is a 7.6% increase compared to August 2014. The airline also recorded an increase in capacity of 11.1% while “revenue passenger kilometres” grew by 10.7%.
The main contributor to the higher passenger numbers where Long Haul flights as the airline carried 17.9% more passengers than last year. Short Haul passenger numbers were up 6.3%. Both division saw a healthy pick up in both demand and capacities.
The Asian market was boosted by the new Auckland-Singapore route as well as larger aircrafts on Auckland-Shanghai which enabled Air New Zealand to carry more passengers. Demand on its Asia/japan/Singapore route jumped more than 40%. The North America and UK routes experienced healthy mid-single digit growth as well.
Outlook for Air New Zealand Appears Favourable
Air New Zealand expects a 25% increase in air capacity between New Zealand and China due to the new strategic alliance with Air China which was announced on 1 September 2015.
In August Air New Zealand released solid full year results which showed revenue increase by 6% to $NZ4.98m while net profit climbed to $NZ 327m, up 24%.
Even though AIZ is down 6.75% year to date, the 12 month return stands at ~22% reflecting the more favourable market conditions for airline carriers. Lower oil prices as well as the lower New Zealand Dollar (NZD) are expected to boost demand and lift profit margins. Taking into account today’s exchange rate, AIZ trades at a price-to-earnings multiple of just 8.5, well below the market and sector average. Whilst further depreciation of the NZD versus the AUD would like put downwards pressure on Air New Zealand’s value in AUD terms, the stock appears to be offering good value.
Wise-owl is keeping AIZ on its watchlist for a potential trading opportunity as soon as conditions settle.
Author: Simon Herrmann
Sep 23, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.