Moody's bumps Air NZ's rating up two notches

1.00pm

Air New Zealand's fundamental credit principals and Government ownership has resulted in it securing an improved credit rating.

Air NZ today said rating agency Moody's had improved its issuer rating "two notches" to Ba2 with a stable outlook.

Moody's regarded Air NZ's recent restructuring into a profitable lower-cost model as credit positive.

Cash balances of about $1 billion were an important buffer for the airline against "outside negative shocks", which were unpredictable in nature and extent, Moody's said.

The rating was based on Air NZ's dominant position in the market, its profitable Japanese and US international business, a solid balance sheet and high liquidity, a well focused management team, and evidence of Government support.

These were balanced against the high level of trans-Tasman competition, concerns a low cost entrant could enter the domestic market, limited track record since its near-insolvency in 2001/02, and its sustainability as a long-haul operator without a Qantas alliance.

Air NZ has a dominant position in the New Zealand domestic market with a 78 per cent market share.

Traffic on the airline's short-haul and long-haul routes were up in April, as were flights to Australia and the Pacific Islands.

- NZPA