Air NZ interim profit soars

WILLIAM MACE
Last updated 05:00 14/08/2013
AIR 2.580 -0.01 -0.39%
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Air New Zealand says it is back in "growth mode" after declaring a huge improvement in half-year net profit to $100 million, up from $38m at the same time last year.

The national carrier's new chief executive Christopher Luxon, who officially took over from Rob Fyfe at the start of the year, said the result was the first step on a path to a "virtuous circle of profitable growth" and announced the airline would lease two new Boeing 777 aircraft next year to bolster its international services around the Pacific rim.

Luxon said the new aircraft were not a response to any perceived risk that its order of Boeing Dreamliner 787-9 aircraft might not be up to scratch after its sister craft the 787-8 was grounded by the Federal Aviation Authority in the United States.

"Its not about mitigating for 787 risk that's there," said Luxon this morning.

"If I was taking delivery of those aircraft in the next three to six months then we might have some concerns, but that is not our reality.

"What we're getting is the Boeing 787-9 ... and we have been in constant contact with Boeing at all levels of our organisation every week, and we are reassured and very confident that there is no risk in production or delivery time for the middle of next year."

Luxon could not specify which routes the leased 777 aircraft would fly because it had not yet been decided.

Excluding gains and losses from hedge exposures, the national carrier reported a 300 per cent improvement in normalised earnings before taxation to $139m for the six months to December, up from $33m the previous year.

It is Air New Zealand's best half-year result in five years.

Operating revenue was up 3.4 per cent to to $2.4 billion.

The airline said the key drivers of the result were the rise in operating revenue, capacity growth across its network, improved international long haul yields, cost containment, and profit improvement initiatives running ahead of expectations.

Air New Zealand has focused on cutting costs, last year saying it would lower its head count by 441 staff out of about 11,000, which Luxon said had contributed $60m in savings towards an overall goal of $250m.

The airline reported $57m of its gain in normalised earnings was due to passenger traffic which had increased by 3.2 per cent.

Improved passenger yield also contributed $15m to the normalised earnings figure however landing charge price increases at New Zealand airports weighed on the cost of aircraft operations, which shaved $19m from the earnings measure.

Chairman John Palmer described the result as excellent progress when put against the backdrop of a sluggish economic recovery and ongoing challenges facing the airline industry. "The substantial change programme the airline has been implementing has positioned the business for consistent growth and sustainable profitability over the coming years," he said.

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The board has declared a fully imputed interim dividend of three cents per share, an increase of 50 per cent on the previous corresponding period.

Air New Zealand's share price is up 5c on trading this morning to $1.39 per share.

- BusinessDay.co.nz

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