Air NZ flies further into loss

By DANIEL RIORDAN

Air New Zealand has posted an operating loss of $52 million for the three months to September 30 - almost twice its loss for the same period last year - and says trading conditions remain "very difficult".

The embattled airline, set to become majority-owned by the Government, also reported $387 million of losses from unusual items, taking its total loss for the financial year's first quarter to $439 million.

Although the company expects better results from this quarter - particularly from domestic operations - as it heads into its peak season, it is not saying when it expects to return to profitability.

The company, in a statement to the Stock Exchange, said directors had approved a five-year business plan aimed at stabilising the business, reducing debt and financial risk, and "creating a platform to return to sustainable profitability in the medium term".

The company said it expected global economic activity and international travel to remain subdued.

It blamed the first quarter's poor result on lower passenger numbers from international flights and continuing low foreign exchange rates.

Last year's comparable figure (a pre-tax operating loss of $27 million) benefited from extra traffic associated with the Sydney Olympics.

The latest quarter's unusual items included $347 million associated with the separation of Ansett, the biggest component of which was the payment of $A150 million ($183 million) to Ansett's administrators.

Also included are redundancy provisions and the write-off of $66 million in possible tax losses, forced by the pending loss of continuity of ownership when the Government takes a likely 83 per cent stake.

Working in the airline's favour was a revaluation of its residual debt to News Corp for the Ansett purchase, which can be paid in cash or shares.

The company's provision for that payment has fallen from $116 million a year ago to $82 million, reflecting the fall in the airline's share price over the past three months, says spokesman David Beatson.

Shareholders' funds fell from $518 million at June 30 to $106 million at September 30, not including the $300 million Government loan advanced on October 15 as the first step in its $885 million rescue package.

Operating cashflow for the quarter was positive.

Air NZ reported a loss of $1.4 billion for the June year after writing off its investment in Ansett. The company's A and B shares closed unchanged yesterday at 29c.

* Air NZ will introduce a $2.15 charge for passengers on all domestic flights to pay for safety-related services provided by the Civil Aviation Authority.

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