Air NZ half year results:
Revenue - $2.4bn, up 4pc
Profit - -$24m, down 80pc
Dividend - 3 cents per share
KEY POINTS:
Profits have fallen dramatically at Air NZ, as the number of passengers flown on the national carrier fell in the last half year.
Net profit after tax was $24 million, down 79 per cent for the six months to the end of December 31, a worse result than many were expecting.
Shares in the airline, which is 80 per cent owned by Government, are currently up 4 cents on the NZX, changing hands at 85 cents each.
While revenue for the airline was up for the half year, this was largely the result of foreign exchange movements, with 6.3 million passengers flown, a fall of 4.3 per cent.
Earnings per share have fallen from 10.1 cents to 3.1 cents.
Passenger numbers on its long haul routes are down 5.5 per cent. Air NZ has reduced capacity to match, with a 5.7 per cent fall in the number of long haul seats being offered.
Short-haul passenger numbers fell by 4.1 per cent and capacity was cut there by just 0.6 per cent.
Airline chairman John Palmer said the past six months had been one of the toughest periods airlines have faced.
"Fuel costs reached unprecedented levels in 2008, with the average spot price increasing 36 per cent on the same financial period last year adding an extra $211 million to the fuel bill. This combined with the deterioration in both passenger and cargo demand, as the global credit crisis intensified, has seen the airline deliver an unsatisfactory financial result, despite the management team's best efforts."
He said Air NZ remained "in a strong financial position".
"Even though the New Zealand dollar has weakened, our foreign exchange hedging programme has shielded us from the full effects, allowing us time to adapt our business. We continue to enjoy a modest gearing level, strong liquidity levels and low capital commitments for the next two years. We have been able to continue investing in the business in areas such as domestic airports, engineering and innovative distribution to make us even more competitive."
Chief executive Rob Fyfe said the key priority remained closely matching supply to demand, while striving to be the market share leader in all chosen markets.
"In these challenging times, it is not the largest airlines that will outperform, but the ones most responsive to change," said Fyfe.
"In the last quarter of the financial year we aim to reduce long haul capacity by 14 per cent compared with the same period last year.
Fyfe said it remained critical for the airline to invest in product and service to retain and grow market share.
"Over the past seven months we have invested more than $60 million in fitting individual on-demand personal entertainment screens on the A320s and 767s that fly the Tasman and Pacific."
More than $30m had been invested in its new domestic airport facilities, which used new technology to help streamline systems.
He said Air New Zealand would continue to vigorously defend its position in the Tasman and domestic markets.
"We are the number one choice for customers and that is not a position we will cede. Our everyday low fares, frequency and uniquely Kiwi experience set us apart from the competition.
"I am confident that Air New Zealand is in one of the strongest positions to weather the current economic climate. We are nimble, have $1.4 billion cash in the bank, modest gearing and a team of 11,800 people committed to being world class. That combination mixed with a uniquely Kiwi attitude and innovation sets a strong foundation for further cementing our goal of being the number one choice for customers flying to, from and within New Zealand."
When it came to the airline's financial outlook, chairman John Palmer said it was hard to predict what would happen this year.
"As we look to the end of the calendar year and beyond, we cannot accurately predict what the winds of economic change will bring; rather we must be prepared for a range of possible scenarios."
The company was benefiting from lower fuel prices, capacity reductions and "cost initiatives".
"If current conditions and jet fuel prices continue, Air New Zealand expects to see financial performance significantly improve in the second half of the financial year."
