Air New Zealand Earnings Up

Late last month, Air New Zealand announced normalised earnings before taxation of $96 million for the six month period ended 31 December 2009 (this represents an increase of $70 million on the same period last year), and normalised earnings after taxation of $64 million.

This was despite an operating revenue that was down 15%, and passenger demand down by 4.6%. However, the airline’s passenger load factor was up three percentage points to 81.6%.

Air New Zealand’s chairman, John Palmer, said that in very challenging conditions this was a good result.

“The fallout from the global financial crisis continued to make operating conditions extremely difficult,” he said. “This has been reflected in lower passenger numbers, cargo volumes and yields, resulting in a 15 percent reduction in revenues. At the same time, fuel prices have returned to more stable levels following unprecedented volatility in the 2009 financial year.

He said that the airline’s ability to deliver a profit during this time was a reflection of “the management team’s focus on closely aligning capacity with demand” and its “ability to deliver innovative solutions to significantly enhance the airline’s competitive position.”

Air New Zealand’s CEO Rob Fyfe said that the result reflects the considerable efforts of more than 10,500 Air New Zealanders and their continued focus on delivering world-class results.

He referred to the recent Air Transport World Airline of the Year Award, which he said recognised those efforts.

“We worked hard to adapt the business to reflect the lower revenue base. As a result, we achieved an 11 percent reduction in non-fuel operating costs, with all operating costs reduced.”

Mr Fyfe insisted that innovation remains a key theme for the year ahead and said the airline had created a culture that “enables Air New Zealanders to have the confidence to think outside the square, and to proactively and creatively pursue solutions.”

Fyfe predicted that the next 12 months would be one of the most defining in the airline’s history and said there is “no question the next year will set the direction and identity of our airline for the next decade.

“Our competitors will be scrambling to catch up as we introduce a world-first long-haul experience, continue to evolve our trans-Tasman and Pacific Island operation and introduce more capacity into our domestic jet operation with the arrival of new A320 aircraft,” he said.

Mr Fyfe said that with improvements close to implementation, Air New Zealand would be able to compete effectively against both budget and full-service airlines.

According to Mr Fyfe, while there had been a stabilisation and recovery of the trading environment, demand and average fares were still significantly lower than in previous periods. He said the challenge remains to improve passenger numbers and yields.

He added that in recent periods, the volatility of fuel prices and foreign exchange rates has overshadowed the natural seasonality of Air New Zealand’s business, but said that he expected a more normal seasonal balance this year with the second half weaker than the first.