Freightways

Market Releases


FREIGHTWAYS ANNOUNCES AIRFREIGHT FLEET UPGRADE

26th June 2015

Freightways Limited (NZX:FRE) has announced a fleet upgrade of its airfreight service to meet the growing demands for its expanding express package business.

Managing Director Dean Bracewell says Freightways' subsidiary, Fieldair Holdings Limited (FAH), will form a Joint Venture (JV) company with Airwork Holdings Limited (AWK) that will operate three Boeing 737-400 freighter aircraft, replacing the current five Convair freighter aircraft operation. AWK will lease the three 737-400 freighter aircraft to the JV company.

FAH currently operates the existing Freightways airfreight business daily between Christchurch, Palmerston North and Auckland. The transition to the new aircraft will start early next year.

Mr Bracewell says that as express package volumes have grown, demand for earlier positioning of freight through the airport hubs has increased, and to sustain the current and the expected new levels of freight required by customers, Freightways has for some time been exploring alternative aircraft. "This new airfreight service will provide increased airfreight carrying capacity, faster sector speeds, savings in annual capital and operating costs and reduced carbon emissions per item of freight carried. In addition, the new fleet will provide sufficient capacity to accommodate the expected future growth of our Business to Business (B2B) and Business to Consumer (B2C) customers."

Customers of the JV company will be Freightways' express package businesses and NZ Post's Express Couriers Limited business and if demand warrants, capacity will be made available to other freight operators. The 737-400 aircraft operate with a net payload of approximately 17,000kg compared to a typical Convair CV580 net payload of 6,500kg.

The carrying value of Freightways’ Convair fleet and related spare parts has been written down by $7.6 million to reflect the realisable US dollar (USD) value of the fleet at the current USD exchange rate. As a non-recurring and non-cash expense, Freightways says this write-down in value will not impact on Freightways’ dividend payments to its shareholders.

Freightways estimates the transition to the new airfreight service, including redelivery of a currently-leased aircraft, will incur capital expenditure of $1.7 million and transition costs of $1.35 million. However, there is expected to be a financial benefit to Freightways of approximately $3 million per annum, primarily related to cash savings in capital expenditure, as well as incremental savings in annual operating costs.

Mr Bracewell is confident the 737-400's will provide sufficient capacity for the future expected growth of the overnight airfreight market in New Zealand "for many years to come and will deliver positive service and financial benefits to Freightways' stakeholders."

Background

Freightways Limited is a leading provider of express package & business mail services throughout New Zealand. It has complimentary businesses servicing the information management market on both sides of the Tasman.

The Group's origins date back to 1964, more than 50 years ago, through New Zealand Couriers - a pioneer in the express package industry. Freightways' businesses deliver around 50 million items annually across New Zealand. In addition to its extensive nationwide network, Freightways offers a worldwide delivery service through alliances with international courier companies.

Through Air Freight NZ Limited, a subsidiary of FAH, Freightways' express package businesses have provided an overnight, inter-island express package airfreight solution, operating their own dedicated airfreight service from airport/road hubs at Auckland, Palmerston North and Christchurch since 1989, when the first of five Convair aircraft was introduced.

Airwork Holdings Limited (AWK) founded in 1936, is one of the oldest aviation businesses in New Zealand. It is a specialist provider of a wide range of services to the aviation industry. AWK is an experienced operator of Boeing 737 aircraft and has recently purchased a number of 737-400 passenger aircraft that will be converted to freighters in the United States. A JV that matches FAH's and AWK's respective aviation expertise pragmatically aligns the capability of each business.

For further information contact:

DEAN BRACEWELL
Managing Director
Freightways Limited
Ph: (09) 571 9670
Fax: (09) 571 9671