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<br>FY21 Preview&nbsp;— Engine Light's On&nbsp;</h2>
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<p><strong>UNDERPERFORM</strong></p>
<p>Air New Zealand (AIR) is due to report a substantial underlying FY21 loss on 26 August 2021, as it continues to suffer from border closures. We forecast an underlying pre-tax loss of -NZ$429m for FY21, which is consistent with management guidance of a loss no greater than -NZ$450m. The recent closure of the trans-Tasman bubble, risks posed by the COVID-19 delta variant, and slow vaccine progress in New Zealand may increase&nbsp;losses in FY22.&nbsp;AIR's&nbsp;net asset value (NAV) remains under pressure, while the required capital raise has been delayed further to early 2022. UNDERPERFORM.</p>
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<h3>Key issues at the FY21 result</h3>
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<li><strong>Cash burn</strong>:&nbsp;The closure of the trans-Tasman bubble, the current national&nbsp;lockdown&nbsp;and aircraft capital payments will mean a return to cash burn in 1Q22.&nbsp;Repayment of the NZ$310m PAYE deferrals from the IRD is now expected between January and March 2022. The drawn-down portion of&nbsp;the Crown's NZ$1.5bn facility is now likely to increase from the NZ$350m outlined at the interim result</li>
<li><strong>Capital raise:</strong>&nbsp;AIR's&nbsp;capital raise was recently deferred again. It is now expected early next year in&nbsp;AIR's&nbsp;3Q22. The government has reaffirmed its intention to retain majority control</li>
<li><strong>Operations</strong>:&nbsp;Cargo will be the key operational highlight of the&nbsp;FY21 result, followed by improving domestic passenger demand</li>
<li><strong>​​​​​​​Recovery profile</strong>:&nbsp;The recovery of trans-Tasman and long-haul travel remains highly uncertain, with the government's medium risk setting trial&nbsp;and population vaccination rates key determinants in the reopening equation. We expect earnings downside risk is a key feature resulting from the prolonged closure of the trans-Tasman bubble and slow border reopening.&nbsp; &nbsp;</li>
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<h3>Conference call</h3>
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<p>Management will host a post result conference call at 11am on 26 August 2021. This can be accessed via&nbsp;webcast&nbsp;or by pre-registered dial-in.&nbsp;Webcast:&nbsp;//<a href="http://edge.media-server.com/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://edge.media-server.com/&amp;source=gmail&amp;ust=1629332790908000&amp;usg=AFQjCNGCac3bMc2MWEL3OzhAtNkiSuPENg" rel="noopener">edge.media-server.<wbr>com/</a>mmc/p/s4pogj3a Dial in:&nbsp;//apac.directeventreg.com/<wbr>registration/event (ID: 6060799)</p>
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Air New Zealand FY21 Preview&nbsp;— Engine Light's On&nbsp;

UNDERPERFORM
Air New Zealand (AIR) is due to report a substantial underlying FY21 loss on 26 August 2021, as it continues to suffer from border closures. We forecast an underlying pre-tax loss of -NZ$429m for FY21, which is consistent with management guidance of a loss no greater than -NZ$450m. The recent closure of the trans-Tasman bubble, risks posed by the COVID-19 delta variant, and slow vaccine progress in New Zealand may increase&nbsp;losses in FY22.&nbsp;AIR's&nbsp;net asset value (NAV) remains under pressure, while the required capital raise has been delayed further to early 2022. UNDERPERFORM.


Key issues at the FY21 result



Cash burn:&nbsp;The closure of the trans-Tasman bubble, the current national&nbsp;lockdown&nbsp;and aircraft capital payments will mean a return to cash burn in 1Q22.&nbsp;Repayment of the NZ$310m PAYE deferrals from the IRD is now expected between January and March 2022. The drawn-down portion of&nbsp;the Crown's NZ$1.5bn facility is now likely to increase from the NZ$350m outlined at the interim result
Capital raise:&nbsp;AIR's&nbsp;capital raise was recently deferred again. It is now expected early next year in&nbsp;AIR's&nbsp;3Q22. The government has reaffirmed its intention to retain majority control
Operations:&nbsp;Cargo will be the key operational highlight of the&nbsp;FY21 result, followed by improving domestic passenger demand
​​​​​​​Recovery profile:&nbsp;The recovery of trans-Tasman and long-haul travel remains highly uncertain, with the government's medium risk setting trial&nbsp;and population vaccination rates key determinants in the reopening equation. We expect earnings downside risk is a key feature resulting from the prolonged closure of the trans-Tasman bubble and slow border reopening.&nbsp; &nbsp;



Conference call


Management will host a post result conference call at 11am on 26 August 2021. This can be accessed via&nbsp;webcast&nbsp;or by pre-registered dial-in.&nbsp;Webcast:&nbsp;//edge.media-server.com/mmc/p/s4pogj3a Dial in:&nbsp;//apac.directeventreg.com/registration/event (ID: 6060799)


Air New Zealand: FY21 Preview — Engine Light's On