Air NZ profit tumbles 90% on higher fuel, labour and maintenance costs
August 27 (BusinessWire) - Air New Zealand Ltd., the national carrier, posted a 90% slump in annual profit as operating
costs rose and increased rivalry in weak markets drove down fares.
Net income fell to NZ$21 million, or 2 cents a share, from NZ$218 million, or 20.7 cents, a year earlier, the
Auckland-based company said in a statement. Revenue fell 2% to NZ$4.7 billion and the airline maintained its passenger
load factor by cutting capacity by 7.2%.
Air New Zealand is one of a handful of carriers, along with rival Qantas Airlines, to keep earnings in the black in the
face of a global slump in air travel tied to worldwide recession and fears of swine flu. Chairman John Palmer today said
the way the global airline industry deploys capacity can’t be sustained and the national carrier is looking at whether
it has the right structure going forward.
“We do have to ensure both structurally and operationally we have a footprint for reasonable economic returns over
time,” Palmer said on a conference call.
The International Air Transport Association has forecast the industry will post combined losses of US$9 billion this
year.
“Few airlines are making profits and even fewer are paying dividends, so our result is a positive one in the global
airline context,” Palmer said. The air travel market is “likely to remain turbulent” and the Australasian market “will
not achieve a satisfactory commercial performance” until supply is aligned with demand, he said.
“While demand is stabilizing, yields remain under significant pressure, fuel prices have resumed an upward trend and we
are unlikely to achieve the same level of net hedging gains,” Palmer said. “The same agility displayed in the 2009
financial year will be imperative through the next year.”
Normalised earnings before tax fell 26% to NZ$145 million.
Shares of Air New Zealand, which is majority-owned by the government, fell 2.4% to NZ$1.22. They have gained 30% this
year. The airline will pay a final dividend of 3.5 cents, bringing the year’s payments to 6.5 cents.
In July, the latest figures available, Air New Zealand’s long-haul passenger numbers tumbled 16.9%, paced by a slump in
traffic from Japan. The carrier cut capacity by 9.7%, trimming its passenger load factor by 6.1 points to 81.6%.
Qantas, which last week posted a 97% drop in annual profit, said there has been improvement in passenger volumes while
yields had stabilized.
Air New Zealand had net cash of about NZ$1.6 billion at balance date, allowing the airline to make investments in its
services including adding fuel-saving winglets and dryers to its Boeing Co. 767 fleet and upgrading inflight
entertainment.
The results included a NZ$375 million negative impact from fuel hedging compared to a year earlier gain, while the net
impact of foreign exchange movements, including hedging gains, was a NZ$272 million benefit.
(BusinessWire)