KEY POINTS:
The soaring fortunes of our majority Govern-ment-owned national carrier Air NZ will be closely watched over the next few weeks, as pressure builds on the airline to cut ticket charges in line with falling world oil prices.
While it was knocked back last year in its attempt to get regulatory approval for an anti-competitive alliance with rival Qantas, things have generally been looking up for the airline, which was saved from ruin by a billion dollar Government bail-out just six years ago.
The continued strength of the kiwi dollar helps the airline, which has to pay for new aircraft, and its massive fuel bill, in US dollars. But a high dollar also makes New Zealand a more expensive destination for tourists. Revenue received from those tourists buying their tickets in overseas currency also falls.
And when faced with competition, it was the Aussies that blinked first, reducing domestic competition and withdrawing last month from the Christchurch to Wellington route.
As oil prices fall worldwide, pressure is growing on airlines to cut back on their ticket surcharges imposed when prices began heading through the roof two years ago.
And investors during the week showed they share the optimistic conclusions reached by Forsyth Barr analyst Rob Mercer, who late last year valued the airline's share price at $2.20 each. The shares spent last week above $2. Mercer also thinks Air NZ will triple its profits over the next four years.
Air NZ said its fuel bill this year would be around $1.1 billion, up from around $900m last year and $480m three years ago.
Over the past six months, the price of crude oil has fallen from a peak of about US$78 a barrel to under US$52. Aviation fuel out of Singapore has dropped 27 per cent to US$68.50, according to Reuters data.
- HERALD ON SUNDAY
