Profitable Air NZ still wary of future

Air New Zealand should show tomorrow that it has returned from the brink to first-half profit.

But the airline is likely to warn of problems ahead.

Air NZ is expected to post an after-tax profit of about $90 million for the December half-year, compared with a $319 million loss for the corresponding period in 2001.

During the six months, Air NZ started its cheap, single-class Express domestic service - which was so successful that inquiries crashed its website - sold non-core assets and drew up a deal under which Qantas would take a stake in its rival.

The Qantas deal is awaiting competition regulators' approval but is supported by the Government, Air NZ's majority shareholder.

The strengthening New Zealand dollar has reduced the airline's large fuel bill - paid in US dollars - and tourists have refused to let reduced buying power deter them and continue arriving in droves.

The number of visitors to New Zealand rose 7 per cent last year. This included a 16 per cent rise in the number of Japanese visitors, who put $657 million into the economy.

Even the dispute with travel agents, unhappy about losing their commission as Air NZ looked to cut costs and encourage Internet bookings, has cooled.

The looming war in Iraq could highlight chinks in Air NZ's rebuilt armour.

Analyst Bruce McKay, of Saffron Capital, would not make a prediction, but said Air NZ would be reporting a "pretty good first-half result".

"If things turn to custard and there's a big downturn in air travel, all the good work that's been taking place may well be undone."

JBWere head of research Peter Sigley said high demand and limited capacity would have boosted the profitability of Air NZ's less profitable international routes.

Shares in Air NZ closed yesterday down 2c at 51c.

- NZPA