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>Transport Titbits —&nbsp;Trans-Tasman Bubble</h2>

Politicians on both sides of the Tasman are talking up the potential for trans-Tasman borders to reopen. Both Governments have endorsed the idea and the industry is working on making it a reality. Yesterday, Deputy Prime Minister Winston Peters suggested that the New Zealand bubble could be extended across the Tasman at Alert Level 2. This timing may be optimistic given the Government’s guidelines for Alert Level 2 (when the disease is contained, but the risk of community transmission remains) state (1) people are advised to avoid non-essential inter-regional travel, and (2) physical distancing of one metre outside the home (including on public&nbsp;transport) is necessary.&nbsp;We consider an early reopening of the border as highly unlikely given the very aggressive approach the New Zealand government has taken thus far, relative to other developed nations. &nbsp;
&nbsp;In reality a bubble could only really work both medically and politically when New Zealand reaches Alert Level 1 (the disease is contained) and Australia, the equivalent. An opening of the border prior to this would be highly damaging if new cases were imported, (1) economically, given a likely return to more restrictive conditions, and (2) politically, in light of the economic hardship many New Zealanders have faced in recent weeks.
A reopening of the border would also need to be undertaken without impractical restrictions (no physical distancing on planes or health checks at either end) to ensure the airlines can operate commercially without additional cost burdens for passengers.
Auckland Airport&nbsp;(AIA) would benefit more than&nbsp;Air New Zealand&nbsp;(AIR) from the Tasman market reopening, in our opinion. The Tasman represented ~43% of AIA’s international capacity (based on seats) in CY2019 compared to ~25% of AIR’s (based on available seat kms). However, with the voluntary administration of Virgin Australia, meaning its return to the Tasman is far from certain, and rationalisation being undertaken by most airlines globally at the moment, including AIR, the future market structure across the Tasman (and other markets, when they open up) may look quite different from pre-COVID-19. &nbsp;&nbsp;
In summary a reopening of the Tasman border is only likely to happen when both countries have been free of new confirmed COVID-19 cases for a number of weeks, in our opinion.
Transport Titbits Chart: COVID-19 new confirmed cases per capita in New Zealand and Australia
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1665435847299382876&amp;th=171cd1144a7b3e5c&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_TXUWJWwMdr-l1gGraiE_6xhPOsfQk-9gksLbQQi_1G3Z6yJllj59vZewm0W3cuS_oqJUQYOgK25esGyTXbAGti_NOKZToOWgxLRayxh_O5-KfB2V7j4P_YY0&amp;disp=emb" width="653" height="426" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: WHO, Forsyth Barr analysis
Andy Bowley&nbsp; Head of Research Forsyth Barr Limited &nbsp; M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Transport Titbits —&nbsp;Trans-Tasman Bubble

Politicians on both sides of the Tasman are talking up the potential for trans-Tasman borders to reopen. Both Governments have endorsed the idea and the industry is working on making it a reality. Yesterday, Deputy Prime Minister Winston Peters suggested that the New Zealand bubble could be extended across the Tasman at Alert Level 2. This timing may be optimistic given the Government’s guidelines for Alert Level 2 (when the disease is contained, but the risk of community transmission remains) state (1) people are advised to avoid non-essential inter-regional travel, and (2) physical distancing of one metre outside the home (including on public&nbsp;transport) is necessary.&nbsp;We consider an early reopening of the border as highly unlikely given the very aggressive approach the New Zealand government has taken thus far, relative to other developed nations. &nbsp;
&nbsp;In reality a bubble could only really work both medically and politically when New Zealand reaches Alert Level 1 (the disease is contained) and Australia, the equivalent. An opening of the border prior to this would be highly damaging if new cases were imported, (1) economically, given a likely return to more restrictive conditions, and (2) politically, in light of the economic hardship many New Zealanders have faced in recent weeks.
A reopening of the border would also need to be undertaken without impractical restrictions (no physical distancing on planes or health checks at either end) to ensure the airlines can operate commercially without additional cost burdens for passengers.
Auckland Airport&nbsp;(AIA) would benefit more than&nbsp;Air New Zealand&nbsp;(AIR) from the Tasman market reopening, in our opinion. The Tasman represented ~43% of AIA’s international capacity (based on seats) in CY2019 compared to ~25% of AIR’s (based on available seat kms). However, with the voluntary administration of Virgin Australia, meaning its return to the Tasman is far from certain, and rationalisation being undertaken by most airlines globally at the moment, including AIR, the future market structure across the Tasman (and other markets, when they open up) may look quite different from pre-COVID-19. &nbsp;&nbsp;
In summary a reopening of the Tasman border is only likely to happen when both countries have been free of new confirmed COVID-19 cases for a number of weeks, in our opinion.
Transport Titbits Chart: COVID-19 new confirmed cases per capita in New Zealand and Australia

Source: WHO, Forsyth Barr analysis
Andy Bowley&nbsp; Head of Research Forsyth Barr Limited &nbsp; M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Transport Titbits — Trans-Tasman Bubble

Auckland Intl Airport

Transport Titbits — Trans-Tasman Bubble