Air NZ says Christchurch, Japan quakes erase profit growth

Air NZ says Christchurch, Japan disasters will wipe out second-half profit; shares tumble 8.4%

By Jason Krupp

March 15 (BusinessDesk) - Air New Zealand Ltd. said the impact of the Christchurch earthquake and Japan’s devastating quake and tsunamis will wipe out its profit in the second half as the national carrier grapples with rising fuel costs. The shares tumbled 8.4%.

Normalised earnings will be below $100 million in the 12-months ended June 30. That dashes hopes of a stronger full-year result after the airline posted 50% growth in earnings to $96 million in its first half, driven by improved load factors and a jump in revenue.

"The financial impact of the Christchurch earthquake is more severe than expected," the airline said in a statement. "Further, the recent tragic events in Japan will also impact revenue in that important market."

The profit downgrade comes after Air New Zealand last week announced average fare increases of 7% as it passed on the impact of higher fuel costs. The carrier said aviation fuel had risen from US$114 a barrel six months ago to US$130 recently, adding as much as US$10 million a month to operating costs.

The carrier had previously flagged fuel price volatility as a significant risk to its earning in February when it reported its interim results, but said that fuel costs were 93% hedged for the second half of the financial year, and 42% for the first half of the next.

The shares fell 9 cents to $1.10 and have dropped about 13% in the past month.

(BusinessDesk)

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