Air New Zealand's Profitability Relies on Borders Reopening

We maintain our NZD 2.00 fair value estimate for shares in no-moat Air New Zealand following the release of interim fiscal 2021 results. The fair value estimate for the Australian listing reduces to AUD 1.86 from AUD 1.90 due to a stronger Australian dollar. Border restrictions and lockdowns continue to wreak havoc on Air New Zealand (and the global airline industry in general), leading to an underlying first-half net loss aftertax of NZD 133 million. Despite aggressive cost-cutting and a progressive recovery in domestic flying, we expect Air New Zealand will remain loss-making in the second half. We now forecast operating deleverage to lead to an aftertax loss of NZD 250 million in fiscal 2021, an increase from our prior forecast of NZD 228 million.