Air NZ says profit plunge positive in global view

Air NZ chief executive Rob Fyfe at this morning's release of the airline's financial results. Photo / Brett Phibbs.

Air New Zealand is emphasising an ability to adapt quickly as it faces more difficult times, following a year of tumbling profits.

The airline today reported a 26 per cent fall in full year normalised earnings before tax of $145 million, while bottom line net profit was down 90 per cent to $21m.

Chairman John Palmer said a combination of excess capacity, deteriorating demand and significant discounting had all worked against Air NZ.

But seeking to put the result into context, he also said that few airlines were making profits and even fewer were paying dividends, so Air NZ's result was positive in the global airline context.

An unchanged final dividend of 3.5c per share is to be paid. Air NZ is 77 per cent-owned government owned.

Palmer said the operating environment was likely to stay turbulent, with global airline losses predicted to be $9 billion in the 2009 calendar year, underpinned by weakened demand and significant global over-capacity.

Air NZ's strong financial position, with net cash of $1.6b at balance date, had given the airline the ability to make the investments that would keep it ahead of competitors.

"Our ability to react quickly remains a key competitive advantage as we have illustrated during this period, and this ability will continue to serve us through the next period of uncertainty," said Palmer.

While demand was stabilising, yields remained under significant pressure, fuel prices had resumed an upward trend and Air NZ was unlikely to achieve the same level of net hedging gains.

Air NZ chief executive Rob Fyfe said the company would continue to invest in new products, technology and customer service, while keeping a strong focus on reducing costs and becoming more efficient.

No area of the business would be immune from change as new developments in domestic, Tasman and long haul airlines were rolled out.

While some certainty was provided by hedge positions relating to foreign exchange and fuel price, demand remained difficult to predict, said Fyfe.

"Although there are some early indicators that the slump in travel demand may be showing signs of having bottomed out, it would be naive to think that there won't be bumps on the road to economic recovery."

The company reported operating revenue for the 12 months to the end of June down 1.2 per cent, or $58m, on a year earlier to $4.6 billion.

Fyfe said competition had heated up and worsened already difficult trading conditions. That was specially evident on trans-Tasman and trans-Pacific routes.

Revenue fell by $280m as the impact of the global financial crisis reduced passenger demand for air travel. Air New Zealand's passenger load factor was maintained through a capacity reduction of 7.2 per cent.

Overall freight, contract services and other revenue fell by $59m on last year, said Fyfe.

Engineering services revenues rose as the business became more competitive with the weakening New Zealand dollar and as newly acquired engineering businesses were integrated.

Losses of $239m were related to hedges on fuel used in the 2009 financial year.

The net impact of foreign exchange movements, including foreign exchange hedging gains, had a $272m benefit compared to last year.

Air NZ's share price is currently unchanged at $1.25.

- NZPA