KEY POINTS:
Air New Zealand shares soared to their highest level since September 2003 today, thanks to cheaper fuel and the airline's improved performance.
The shares rose nearly 7 per cent or 17c to $2.67, easing back 2c at the close of trading. The last time they were higher was three-and-a-half years ago when they hit $2.98.
The spike follows an Air NZ update and industry conditions which one analyst called a near "perfect confluence" of factors.
Group-wide yields improved 10.1 per cent for the year to date, and the airline's March passenger load factor -- the proportion of seats filled -- improved by 7 percentage points compared to a year earlier.
That lifted the load factor to 79.5 per cent -- the result of an 8.3 per cent increase in traffic numbers despite group-wide capacity reductions of 1.3 per cent, Air New Zealand said.
Centre for Asia Pacific Aviation executive chairman Peter Harbison said this week that Air New Zealand had been doing the right things for the past couple of years.
"It's really quite impressive," he said.
Along with focusing on costs, the company had been quite good at pruning unprofitable routes, and the strong New Zealand dollar had lowered its jet fuel costs.
Mr Harbison said the airline industry was also enjoying a sweet spot.
Economies were strong, generating business, at the same time as the airline industry was a little deprived of capacity, as few new aircraft had gone into service.
So the average number of passengers on each flight had gone up, leading to an increase in average fares within the industry, which went straight to profitability, Mr Harbison said.
However, Air NZ had some potentially large competitors, including Qantas subsidiary Jetstar and Virgin Blue, and the possibility of Tiger Airways looking across the Tasman after establishing itself in Australia.
Air New Zealand was vulnerable on the trans-Tasman route, which was a disproportionately large part of its activities, Mr Harbison said.
"It's a good time to be positioning well and I think by adding capacity to their own fleet, they're (Air NZ) sending out a signal that we're not going to surrender the fort very easily."
Air NZ also said that additional aircraft and a change in seating would mean an increase of almost 20 per cent in domestic jet seat capacity.
- NZPA
