Fuel costs burn off Air NZ profits

Air New Zealand must shrug off the high fuel prices that have almost halved its profits and increase revenue if it is to stay internationally competitive, says chief executive Rob Fyfe.

The airline yesterday unveiled a 47 per cent drop in net profit to $96 million for the year to June 2006.

Fyfe said the numbers were disappointing but respectable in the face of fuel costs that had risen by $275 million (44 per cent) during the year.

The net profit was also dented by $44 million in unusual items relating to new aircraft purchases.

Fyfe said the outlook on fuel remained so volatile the company was not prepared to forecast profit for the coming year. But he was positive about growth prospects. The company would continue looking to open a new long-haul route every 12 months.

In fact, the strong balance sheet - current assets total $1.72 billion - would give it a strong competitive advantage through the high fuel cycle.

Fyfe said the airline would retain a strong focus on costs and various initiatives were under way to try to cut a further $100 million from the cost structure. Although some redundancies were likely, staff levels were expected to be relatively stable around 10,200 after a 6 per cent cut in the past year amid restructuring at head office and in the engineering section. There was still some restructuring due for airport-based staff.

A reduction of capacity on the transtasman route was inevitable.

Air NZ shares were stable at $1.13 yesterday.