KEY POINTS:
Air New Zealand, 80 per cent owned by the Government, today reported it lifted its December half year net profit by 58 per cent to $115 million.
It hiked its interim dividend by two thirds to 5 cents per share.
Deputy chairman Roger France said the "solid" result was achieved with high loadings and despite increased competition and high fuel prices.
Normalised earnings before tax and unusual items rose by 62 per cent per cent to $159m.
The company remains optimistic for the full year.
"Air New Zealand still expects to better 2007 normalised earnings before taxation and unusual items in 2008, however oil price volatility has reduced the certainty with which the company can forecast its year-end financial performance," Mr France said.
Operating revenues rose 9.6 per cent and while loading increased by 5.3 percentage points to 79.4 per cent.
Mr France said the company's newest destination to Vancouver was performing better than anticipated since its launch in November.
Revamps to its routes meant the international airline was growing at a faster rate than any stage in the airline's history.
In the domestic service, Air New Zealand is mulling introducing set services to some provincial years.
He said the entry of Pacific Blue into the domestic market had meant that capacity had run ahead of growth in demand on the main trunk routes.
Cash generated from operating activities, prior to the impact of the rollover of short dated foreign exchange contracts, was $320m, an increase of $93m over the previous corresponding period.
The company lifted its net cash position by $165m to $1.22 billion.
It had largely completed its aircraft reinvestment programme and was not experiencing significantly lower capital expenditure demands.
Capital expenditure for the full 2008 financial year is expected to be around $300m, which includes the cost of recently introduced Q300 aircraft and the start of the proposed upgrade of the in-flight entertainment system on its A320 and B767-300 fleets.
The next big investment cycle commences in 2010, when progress payments on the new B787 and B777-300ER aircraft increase ahead of their scheduled delivery dates in the 2011 financial year.
Chief executive Rob Fyfe said the stand out feature of the period's performance was the $186m revenue growth from increased traffic.
"This additional traffic, combined with increases in local currency yields of $71m results in an increase in passenger revenue of $257m."
Other revenue increased by $38m on higher cargo volumes and an increase in third party engineering contracts.
Increases in labour cost added $47m to the cost base year on year.
The unhedged price of fuel increased by 13 per cent from US$82 ($101.64) per barrel to US$93 per barrel resulting in an $87m cost increase.
Volume increases contributed an additional $32m in cost.
The cost was offset by $38m of hedging benefits giving rise to a net cost increase of $81m.
Fuel costs will be substantially higher in the second half as hedging benefits expire.
Movements in foreign exchange rates and currency hedges had a net negative impact of $14m.
Long haul capacity increased by 9.1 per cent on the same period last year with load factors up 5.7 percentage points to 80.8 per cent.
While domestic passenger revenues increased by 4.5 per cent for the half year, the company added 6.2 per cent more capacity and as a consequence load factors dropped slightly to 73.7 per cent.
Air NZ shares closed at $1.76 yesterday. They have fallen from $3.13 on June 7.
- NZPA
