Air NZ's profit forecast jumps by 15pc

By CHRIS DANIELS

Air New Zealand has raised its profit expectations by $30 million for the year to June 2003, helped by good domestic loads and a strong kiwi.

After forecasting in November a profit before unusuals and tax of $200 million, the airline said yesterday that it expected to make $230 million for the year. It will announce its results for the six months to December 31 on February 27.

Chief executive Ralph Norris said that although the result would be a significant improvement on recent years, it should be viewed in the context of the company's substantial assets. If achieved, the $230 million profit would represent only a 5.9 per cent pre-tax return on assets.

The airline's monthly operating statistics were also released yesterday, showing total traffic for November up by 26.5 per cent on increased capacity of 6.6 per cent.

Finance Minister Michael Cullen jumped on the Air New Zealand announcement, saying it showed the advantages to the airline of keeping its prices down. The additional earnings reflect higher-than-expected demand as people had taken advantage of the new, cheaper fares.

"Clearly much of that travel is discretionary, and would not happen if fares rose," Cullen said.

This created a strong commercial imperative for Air New Zealand to resist fare increases.

It "should reassure those people who are concerned that the proposed strategic alliance between Air New Zealand and Qantas will lead to price rises".