Air NZ posts $165.7 million profit

12.00pm

Air New Zealand today reported a June year net profit of $165.7 million -- its first full year net profit in four years.

Air NZ chief executive Ralph Norris said in a statement that the airline's strong domestic business and improving international business underpinned the profit, compared with a loss of $319 million a year ago.

Air NZ's profit before unusual items and tax was $220.3 million for the year ended June 30, up $187.3 million on the previous financial year.

"Profits were also assisted by the strengthening of the New Zealand dollar against the United States dollar," Mr Norris said.

"As approximately 45 per cent of our costs are US dollar denominated, the rising exchange rate reduces costs in New Zealand dollar terms.

"Partially offsetting this effect is the reduction in the New Zealand dollar value of fares sold in foreign currencies," he said.

During the year Air NZ flew 5.8 million passengers within New Zealand, an increase of 6.2 per cent on the previous year, partly as the result of the airline's Express Class launched in November.

Domestic traffic rose 7.3 per cent, and capacity fell 1.5 per cent, with a load factor of 72.7 per cent. Internationally, Air NZ's short-haul traffic fell 2.8 per cent, capacity fell 3.6 per cent and the load factor was 75.0 per cent.

Total sales revenue fell 18 per cent to $3.62 billion, and total operating revenue was also down 18 per cent to $3.64 billion.

The company's cargo division produced revenue of $296.1 million.

While the financial year began with a strong rebound in demand for travel after 2001, the second half showed a decline in traffic after the Sars outbreak and the Iraq war.

Air NZ chairman John Palmer said the airline could not afford to stand still, and its future depended on the proposed alliance with Qantas receiving regulatory approval.

"There are numerous recent examples of airlines that have been profitable one year and bankrupt shortly thereafter. While pleased with our progress, it should be noted that the company is still not achieving its cost of capital," he said.

"We must address the fundamental problems of over-capacity and cost structure and it is for this reason that we believe that the alliance with Qantas provides the best future for Air NZ.

"Despite the difficulties of the industry, we remain optimistic that, with regulatory approval of the alliance with Qantas, Air NZ will have the ability to make the changes required to survive and prosper," Mr Palmer said.

" We are determined to continually transform and simplify our business to remain ahead of industry change."

Air NZ was on the verge of bankruptcy at the end of 2001 when its Ansett unit collapsed and the industry slumped in the wake of the September 11 attack, until the Government bailed it out with $885 million.

Air NZ shares were unchanged today but closed yesterday at 49c.

Air NZ will not pay a dividend.

- NZPA