Air New Zealand was better placed than its transtasman competitor Qantas to weather the current global recession and downturn in passenger travel, ABN Amro Craigs broker Chris Timms said yesterday.
"We are expecting clients to start shifting to Air NZ, away from Qantas, if they still want exposure to the airline industry."
ABN had a buy recommendation on Air NZ and a sell on Qantas.
On Tuesday, Qantas said it would make up to 1750 staff redundant - about 5% of its workforce - as well as ground planes and defer aircraft orders in response to falling demand for air travel, particularly on international services.
The job cuts follow a massive decline in international travel which had seen Qantas slump into the red for just the second time in 15 years.
Chief executive Alan Joyce said Qantas had slashed its guidance and now predicted before-tax pro-fits of between $US100 million ($NZ174 million) and $US200 million, down from the $US500 million in its previous forecast.
Mr Timms said Air NZ had been more aggressive last year than Qantas in cutting its forward capacity.
That helped mitigate higher fuel costs and left Air NZ in a stronger position.
ABN analysis showed that although Qantas' earnings before interest, tax, depreciation and amortisation were forecast to be twice as large as Air NZ's earnings, Air NZ's net profit was expected to be twice as large as that forecast by Qantas.
"This is a significant slow-down for Qantas. While Qantas is just starting to cut operationally, Air NZ has done all of that and is now continuing its focus on profitability."
Qantas had indicated it was cutting back its luxury travel capacity, he said.
At the same time, Air NZ had increased its premier economy capacity, he said, and had minimal capital expenditure requirements in the next two years, $1.4 billion of cash, near zero debt and comfortable gearing of 52.7%.
"We view Air NZ as a trading stock for less cautious investors given the super cyclical nature of the sector."
ABN had downgraded its Qantas recommendation from hold to sell.
Mr Timms said the share price rally yesterday was unlikely to be sustained in the face of expected consensus earnings downgrades in what was still a very tough operating environment.
Qantas shares continued to trade at a discount, but ABN did not see any near-term catalyst that would push the share price back to earlier levels, Mr Timms said.
