KEY POINTS:
Air New Zealand's strategy of cutting capacity on key routes continued to pay dividends in March as it flew fuller planes than a year ago.
Shares in the airline hit a 3 1/2-year high of $2.51 as the company released data showing its passenger load factor - the proportion of seats filled - improved by 7 percentage points in March, compared with 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.
At the same time year-to-date group-wide yields improved 10.1 per cent.
Centre for Asia Pacific Aviation executive chairman Peter Harbison said Air New Zealand had been doing the right things for the past couple of years.
Along with focusing on costs, the company had been quite good at pruning routes, focusing on those that were profitable. If he read the position correctly, there was also a self belief within the company now that had been missing a couple of years ago, Harbison said.
At the same time, the airline was a beneficiary of a "nice, warm breeze" sweeping through the industry, a near "perfect confluence" of factors.
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, Harbison said.
Fuel costs, which were creeping up again, were probably the only "sore thumb" in the mix.
But fuel costs were denominated in US dollars, and the US currency had weakened.
So airlines such as Air New Zealand, which had revenues in local currencies that had appreciated strongly against the greenback, had a nice edge while the US currency was down, he said.
However, there were some large potential competitors on the horizon.
They included Qantas subsidiary Jetstar, which crosses the Tasman now and whose boss said a fortnight ago that it was only a matter of time before it operated domestically in this country. Air New Zealand would also not want to see more aggression from Virgin Blue, and there was the possibility of Tiger Airways looking across the Tasman after establishing itself in Australia.
Air New Zealand was vulnerable on the transtasman route, which was a disproportionately large part of its activities, Harbison said.
In yesterday's update Air New Zealand said a 15th leased Boeing 737 would be added to its domestic network in November and a 16th aircraft was expected in the first half of 2008.
Combined with adjustments to the seat configuration on the existing 737 fleet, the additional aircraft would mean an increase of almost 20 per cent in domestic jet seat capacity.
- NZPA
