Five reasons for Air NZ's record profit

Deputy Editor - Business·NZ Herald·

25 Feb, 2016 01:00 AM2 mins to read

Air New Zealand's after-tax net profit of $338 million puts the airline in a powerful position to continue on its strong growth track. Photo / Jason Oxenham

Air NZ pre-tax earnings for the first six months of the year are $457 million - up $260 million on last year. Here's what's driven the record result

The tourism boom

The airline has ridden the biggest tourism surge in years with visitors flocking in from China, the United States, Britain, Europe and Australia driving passenger revenue up $315 million (or 16 per cent) to $2.3 billion. Air New Zealand carries about 40 per cent of tourists to this country and then on through its domestic network. New Zealanders are also flying overseas and domestically in record numbers.

A nice balancing act

The 16 per cent increase in capacity with new routes to the US, Argentina and more seats to existing destinations here and overseas has been matched by the 16 per cent rise revenue. The airline's filling the big increase in seats with passengers who are paying the right price.

Falling fuel prices

Oil was heading for 12 year lows during the last six months and Air New Zealand chief executive Christopher Luxon said total fuel benefits added up to about $150 million. Through its hedging policy it was able to take advantage of about 82 per cent of the value of those falls.

The average US dollar fuel price was 44 per cent lower than the previous corresponding period.

Watch: Air New Zealand profits soar 154pc

An efficient fleet

While many other airlines are only now revamping their fleets, Air New Zealand has been buying new aircraft for years and is now able to capitalise on this. Even though it did 16 per cent more flying during the last six months it used only 12 per cent more fuel - the promised savings from new planes are materialising. The airline estimates fleet simplification saved it $106 million during the six months.