Reduced demand hurts Air New Zealand

Photo / Sarah Ivey

Air New Zealand reported normalised full year earnings before tax falling 6 per cent to $137 million, amid subdued demand for air travel in tough economic conditions.

Operating revenue for the year fell 12 percent or $563m to $4 billion, although when the unfavourable impact of the strengthening New Zealand currency and discontinued freighter operations were excluded, it fell 8 per cent.

Passenger revenue fell by $429m in the year to June, due to a 7.1 per cent fall in yield and a 4.7 per cent demand decline, measured in revenue passenger kilometres, the airline said today.

"While stabilising fuel prices and reduced operating costs provided some relief, reduced demand combined with a fall in ticket prices significantly reduced passenger revenue."

Air New Zealand chairman John Palmer said uncertainty surrounding the global economic recovery had continued to suppress demand for air travel during the past 12 months, but the airline continued to be more profitable than most of its peers on a comparable basis.

"The board has strong confidence in the airline's ability to adapt to change and return stronger profitability in the medium term, while also recognising the need for preserving financial flexibility through this extended period of uncertainty."

Chief executive Rob Fyfe said a wide range of business initiatives were under way, including significant capacity growth in the coming months.

"We have significant growth plans for our domestic jet operation with capacity increasing by 8 percent progressively from September, the equivalent of one additional Boeing 737 aircraft. Among the increases Auckland-Wellington capacity will go up by 9 percent and Auckland-Christchurch by 10.4 percent," Fyfe said.

"Further capacity will be available with the arrival of the first new A320 aircraft from February next year and will see direct Dunedin-Auckland services increase by 46 per cent from 13 to 19 per week, and Auckland-Queenstown capacity rise by 13.6 per cent."

The company was waiting for regulatory approval on both sides of the Tasman for a proposed trans-Tasman alliance with Virgin Blue, which would enable Air New Zealand to compete more effectively against the Qantas group in the Australasian market.

Air New Zealand said it was optimistic operating earnings would continue to improve through the 2011 year, with the airline industry showing signs of recovery as both demand and yield improved.

The company's bottom line net profit for the latest year was $82m, compared to $21m a year earlier.

A final dividend of 4c a share is to be paid, from 3.5cps last year, taking the full year dividend to 7cps.

Air New Zealand shares were up 4c, or 3.3 per cent, to $1.25 in the first half hour after the sharemarket opened.

- NZPA