The Air New Zealand Ltd (ASX: AIZ) share price is on watch this morning after the airline provided an update from its business review announced on 30 January 2019.
What did Air New Zealand say in the business review update?
The business review was announced after the airline downgraded its profit guidance for the 2019 financial year as it seeks to improve financial performance and customer experience.
Management expects the outcomes of the review to positively impact revenue growth, capital efficiency, operating costs and the customer travel experience into 2020 and beyond.
The key outcomes of the review are summarised below:
-
Optimising network to maximise and diversify revenue
- Planning for network growth of 3% – 5% on average over the next three years, revised from 5% – 7% to reflect slower demand growth environment.
- Network growth focused on stimulating tourism, with the launch of new direct services between Auckland and Seoul from November 2019 as well as increased Auckland-Tapei and Auckland-Chicago services.
-
Increasing capital efficiency through retiming of fleet orders
- Aircraft capex of ~$750 million will be deferred to ensure capacity growth better reflects the slower demand growth environment including deferring delivery of 6 aircraft.
-
Improving efficiencies across the cost base
- Improving the airline's operational cost base to set the airline up for success in the current lower revenue growth environment which is designed to deliver more than $60 million in additional savings on an annualised basis in addition to the ongoing cost-saving initiatives of more than $50 million per annum.
-
Continuing to invest in the customer travel experience
- Elevating the customer travel experience with a number of enhancements including the progressive introduction of an enhanced Business Premier experience and a new, more spacious, Economy product offering on long-haul fleet from mid-2020.
These outcomes should serve to improve Air New Zealand's long-term cost base efficiency but I'm not sure how the market will receive the aircraft deferral moves in today's trade.
Personally, I think Qantas Airways Ltd (ASX: QAN) share price is a better buy at the moment despite the recent rise in oil prices as it looks to expand its network and continue its meteoric share price growth.
For those who aren't ready to invest in Air New Zealand just yet, I'd suggest checking out this top-rated stock in a booming industry could give you the edge as a growth investor.
