Air New Zealand H1 Profit Down On Fuel Costs

February 23, 2012

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National carrier Air New Zealand reported a 61 percent fall in first half profits as fuel prices pushed higher, and said it would be challenging to achieve the same full-year profits as in 2010/11.

The company said the result was disappointing and has been unable to pass higher fuel costs to passengers in a weaker global economic climate, but it was taking action.

"We have already commenced a series of initiatives to improve the airline's profitability," said chief executive Rob Fyfe.

He said the aim was to improve profits by more than NZD$195 million a year by the 2015 financial year through cost cutting, improved efficiencies and revenue growth.

Fyfe said 441 jobs would go this financial year, with just under half already achieved.

The largely state-owned airline reported a net profit for the six months ended December 31 was NZD$38 million (USD$31.7 million) compared with NZD$98 million a year ago.

The company declared a dividend of 2 cents a share from 3 cents last year.

It said its domestic routes were boosted by extra traffic for the Rugby World Cup held in the country in September and October, but that long-haul operations were sluggish given weak European and Japanese travel markets.

This, along with an ongoing climb in fuel costs, were a significant risk to its full-year results, the company said.

The stock has fallen around 2 percent so far this year, compared with 1.6 percent rise in the benchmark NZSX-50 index.

Last month the airline said Fyfe will step down from his chief executive post before the end of the year.

It has previously warned that its long haul operations have been a drag on earnings, although it has reaffirmed that it will keep flying to London.

Air New Zealand has a near 20 percent stake in Australian carrier Virgin Blue with whom it also operates a commercial alliance on routes between the two countries to combat aggressive competition from Australian carrier Qantas and its low cost offshoot Jetstar.

It said it has increased its order of the long delayed, light weight Boeing 787 Dreamliner to 10 from eight, although it will not likely receive its first plane before 2014, nearly four years late.

"Despite the extremely frustrating and costly delays, we strongly believe the 787-9 is the right aircraft for Air New Zealand and worth the wait," said Fyfe.

The New Zealand government has said it plans to sell down its stake in the airline, but will retain majority control, although such a move is some way off and would depend on market conditions.