Tamati Ellison, Victor Vito, Dan Carter and Aaron Smith Dan Carter, in one of Air NZ's All Black promotional posters.
Tamati Ellison, Victor Vito, Dan Carter and Aaron Smith Dan Carter, in one of Air NZ's All Black promotional posters.
Moody's Investors Service has upgraded Air New Zealand's credit rating by one notch after changing its debt treatment of operating leases and on the prospect that cheaper jet fuel will assist the national carrier's earnings for the next two years.
The Auckland based airline's rating was raised to Baa2 from Baa3 on Friday, with the rating agency maintaining a stable outlook. Moody's changed its approach capitalising operating leases which led to a reduction in Air NZ's adjusted debt, and anticipates lower jet fuel prices and strong demand will underpin the airline's earnings over the next 12 to 24 months, it said.
"The upgrade also reflects Air New Zealand's strong operating performance of the last 12 to 24 months, and our expectations that the company's capacity growth and strong cost control measures will lead to improving margins for the carrier over the next 12 to 18 months," Moody's senior credit officer Matthew Moore said.
"Moody's expects operating and cost improvements to result in Ebitda (earnings before interest, tax, depreciation and amortisation) margins improving to around 25 per cent versus the around 22 per cent achieved for the last 12 months to December 2014."
Last month Air NZ said it expects to report normalised pre-tax earnings of between $520 million and $530 million in the 12 months ended June 30, up from $332 million a year earlier. The airline's first-half result was bolstered by cheap fuel and increased passenger numbers, a trend that carried on into the second half of the financial year.
The upgrade also reflects Air New Zealand's strong operating performance of the last 12 to 24 months, and our expectations that the company's capacity growth and strong cost control measures will lead to improving margins for the carrier over the next 12 to 18 months.
Moody's said Air NZ's business model was unique among global carriers in that its domestic market share of about 80 per cent was more than any other major carrier.
The rating agency said the rating could face downward pressure if there was a substantial increase in competition or if the airline's earnings deteriorate due to more expensive fuel or dwindling demand.
Qantas Airways' subsidiary Jetstar plans to expand its New Zealand offering with at least four new regional routes later this year, and Air NZ has responded by saying it won't be undercut on pricing.
Air NZ shares last traded at $2.57, and have advanced 4.1 per cent this year.
All Blacks get another 5 years of Air NZ backing
The airline said it had renewed its sponsorship of the All Blacks for another five years to 2020.
The airline, which has sponsored rugby for more than two decades and been an official partner of the All Blacks since 1998, will also be the main sponsor of the children's rippa rugby national championship.
Chief executive Christopher Luxon said the airline was "thrilled" to extend its commitment to New Zealand rugby.
Christopher Luxon, chief executive of Air New Zealand. Photo / Ben Fraser
"We are extremely proud to be supporting the world champion All Blacks, especially as they gear up for a very important season starting with the history-making match against Manu Samoa in Apia on Wednesday. We're excited about operating our special fan flight to Apia to get loyal supporters to the game.
"As an airline that's crazy about rugby from the grassroots up we are also dedicated to supporting community rugby across all of New Zealand's regions, which is why we have signed on as sponsor of the 'rippa rugby' national championship."
NZ Rugby chief executive Steve Tew said Air NZ's partnership had been "hugely beneficial to both the All Blacks and the wider New Zealand community over the years".
"The airline has been instrumental in not only getting the All Blacks to tests, but also connecting the team to more fans around the world through its clever marketing campaigns, charter flights and special community events. It's great to have them backing our teams over an exciting five years ahead for rugby, which includes another Rugby World Cup and a British and Irish Lions tour.
"We really appreciate the support of sponsors like Air New Zealand who help boost the profile of rugby and ensure the game remains financially healthy so we can continue to invest in rugby at all levels, retain our best players and produce winning teams."
Under the new agreement, Air NZ will be known as the official airline of the All Blacks and the All Blacks sevens.
As well as a charter flight to Apia today, which gives fans a chance to fly with the All Blacks and their touring party, Air NZ is backing an All Blacks community day and parade in Apia tomorrow.
