Ann: Air NZ updates on capital raise timing and liquidity, page-252

I reckon airlines face major headwinds and AirnZ more so.

Firstly business travelers - the high margin staple of airlines. Zoom and Teams has taught bean counters that business can interact with their market for essentially zero cost. Sales people have also learnt they can conduct some sales / customer service over Zoom and MS teams from the comfort of their home and not an airport lounge. Customers have also learnt they can transact business over Zoom /Teams. So add those three things together I see a substantial reduction in business travel. It will of course not dry up totally. Business does need to be face to face with its markets. But the threshold for setting these meetings will be higher.

Next Government travel. Certainly in NZ this is bread and butter for AirNZ. Public servants love to travel on tax payer coin. However they too have learnt to work from home. Here they are literally running scared and it is really difficult to get them back into CBD offices. Let alone planes. But I reckon they will travel by air much faster than they will commute to offices. So I am picking an initial major drop in this travel - but it will grow to near pre- covid levels.

Family travel. This will return to near precovid levels. However I don't think we will see a fast return to bulk discount fares. And with rising inflation families may not have as much cash as they would like for visits.

Tourists. Well for a start airlines have to chew through all the prepaid fares sitting on their books. (I currently have loads of flights I paid for but haven't used but will do so in the next 6 months). Then tourist destination. NZ govt has explicitly said they don't want backpackers here. They want "high value" tourists. The trouble with some of these is they will arrive at the international airport and then take helicopters to their destinations of choice (I'm thinking hunting and fishing here) or they will jump on their tourist bus ( I am thinking the chinese here). So domestic air may not get much of a lift.

So put all those things together and look at AirNZ. Major competition on the international sectors. Essentially a monopoly on domestic - but there are alternatives.

And that is without looking at geopolitical risk and fuel costs.