Air New Zealand Ltd [AIR.NZX] shares have been doing the impression of a kamikaze pilot on speed for the first 3 months of 2011.
Even before the profit downgrade yesterday the shares had dropped from a high of $1.54 in January - the highest share price since mid 2008 - to $1.17 the day before the announcement. A loss of just under 25%.
Shares today were up 2c to $1.08 after closing down at an 8 month low of $1.06 yesterday.
The share price drop can be put down to a combination of oil price rises, and earthquakes in New Zealand and Japan but the uncertainty of its short and medium term prospects is making this company unattractive at the moment.
If you are a reader of mine you will know I am not a big fan of Airlines as investments, and I especially dislike the way Air New Zealand is run but I am going to be unbiased in my assessment anyway.
Surely there must be value in the company at these prices right?
Well if you are a long term investor like myself, forget it. Long term Air NZ has returned 6% in total over the 8 years to February 18 2010. This figure is substantially less than that given today's share price is approximately 30% lower than it was when I made my Feb 2010 calculation.
Short term though you could be onto a winner at these prices.
The Rugby World Cup should get the punters using their planes more in the first half of financial 2012 and they might be able to raise prices to recoup oil cost pressures over the rest of 2011.
After that things start to look a little shakey.
The Japanese, who are big customers of AIRs, may decide to hunker down at home instead of coming down here and the entire town of Christchurch, around 8% of our population, will not be flying anytime soon.
Oil prices may also outstrip the ability of the airline to raise prices further and not affect their patronage.
Just too many variables for a business for my liking!
You may see some more share price pressure if the situation in Japan has longer lasting effects than first thought, so some patience for a further fall might see you get shares under a dollar.
Buy on further weakness for a short term gain.
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c Share Investor 2011
Any chance you could forward this to the govt as Air NZ is being held up as a shining example of state majority ownership, a position I haven't been able to get my head around?? I'm on the fence re selling the state assets (the right/market says a govt can't run the cutter efficiently and the left says it shouldn't!)
ReplyDeleteGary, the state energy assets would be a good investment if managed well but I personally wouldnt invest in any airline, state or privately owned. Long term they are BIG money losers.
ReplyDelete