AirNZ Reports Strong Performance in First Six Months

24 February 2011

Air New Zealand is releasing its half year result today, at a very sad time when the company focus is on the disaster in Christchurch and what we can do to assist.

Normalised earnings* before taxation are $112 million for the six month period ended 31 December 2010, including an $18 million gain on equity swaps relating to the investment in Virgin Blue.

“Overall Air New Zealand has had a strong six months. Passenger numbers, cargo volumes and yields have all increased year on year, with an increase in revenues of nine percent. This has been offset by costs relating to increased capacity, increasing fuel prices and losses from foreign exchange hedges,” says Air New Zealand Chairman John Palmer.

“Air New Zealand continued to invest throughout the worst of the global financial crisis and is now in a far stronger competitive position as a result of our innovation, people and strategic alliances. We now have a solid platform to progress and build value from these investments.”

After reviewing Air New Zealand’s financial position and financial commitments the Board has declared a fully imputed interim dividend of 3 cents per share.

Key highlights

Normalised earnings* before taxation of $112 million
Normalised earnings* after taxation of $96 million
Operating revenue up 9% to $2.2 billion
Passenger demand up 6%
Passenger load factor up 2.6 percentage points to 84.2%
Net cash position $940 million
Interim dividend of 3 cents per share
Gearing improved by 4.5%, at 42.8%

Air New Zealand Chief Executive Officer Rob Fyfe says the last six months has been an exciting period as the airline has seen initiatives come to fruition which have further strengthened its competitive position.

“Bookings on our Tasman and Pacific Island services have increased 15% since the introduction of the Seats to Suit product, performing far better than we expected. The trans-Tasman is an extremely competitive and important market for us and together with our alliance with Virgin Blue we are in a very strong market position.”

“Domestic passenger numbers are also up eight percent on the same period last year and we are adding capacity to meet that increased demand as our new Domestic A320 fleet arrives,” says Mr Fyfe.

“Cargo Revenue has recovered, up 13 percent compared to last year. Volumes were up 6 percent on a small capacity increase and a strong 10 percent increase in yields. Improvements were achieved in all markets with the Pacific and Asian routes being the primary contributors.”

“Overall passengers load factors increased by 2.6 percentage points over the same period last year, group yield has increased by 3.0 percent, we have added 2.7 percent capacity and seen an increase of 6.0 percent in demand.”

Outlook

We have been successful in implementing initiatives across all facets of the business to enhance Air New Zealand’s customer experience, product offering, network, technology, efficiencies and strategic position. Demand and yield have improved which together with the benefit of a stronger NZ dollar as our hedging profile rolls off later in the year and the implementation of new initiatives, sets a strong platform for future performance.

Fuel price volatility remains a significant risk to the year end result. A key management focus will be assisting with the recovery from the devastating Christchurch Earthquake and working with tourism partners to mitigate the economic effects.

* Normalised earnings exclude the impact of derivatives that hedge exposures in other financial periods. The $112 million includes an $18 million gain from equity swaps relating to the investment in Virgin Blue. Statutory profit before taxation were $115 million ($98 million after taxation), up $31 million on the same period last year.

ENDS

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