Air New Zealand Reports Reduced Profit

Media release
24 February 2012

Air New Zealand Reports Reduced Profit

Air New Zealand today announced normalised earnings* before taxation of $33 million for the six month period ended 31 December 2011, a 71% decline on the same period last year. Net profit after taxation was $38 million.

“Acknowledging this disappointing result we have already commenced a series of initiatives to improve the airline’s profitability by more than $195 million per annum by FY15 through a combination of cost reduction, improved efficiencies and revenue growth,” says Air New Zealand Chief Executive Officer Rob Fyfe.

“The price of jet fuel has doubled over the last three years but a weak global economy is hindering our ability to pass on these higher fuel costs to passengers.

“Therefore we have been moving quickly to adapt, to gain greater efficiencies and to develop into a stronger, more profitable business.”

Air New Zealand Chairman John Palmer says the operating market is extremely difficult at present, squeezing profits.

“The airline has enjoyed a solid performance from the domestic network including benefits from the Rugby Word Cup and improved market share on the Tasman, but the international long haul network continues to face a challenging time in the European and Japanese travel markets.

“The balance sheet remains strong and is reflected in the Board’s decision to declare an interim dividend of two cents per share.”

Rob Fyfe says the airline has worked hard to improve its competitive position with a number of initiatives already delivering towards the airline’s target of significantly improved future profitability.

“We plan to remove 441 roles from the business before the end of the financial year. A total of 266 of these roles are being exited through non replacement of roles or non renewal of contracts, of which 193 have already been achieved. The removal of the remaining 175 roles will result in redundancies and we begin the consultation process with affected staff this morning.

“Our focus on revenue growth includes the recent launch of OneSmart, the only prepaid debit card in New Zealand that awards loyalty points, the development of more alliances with key carriers like ANA in Japan, new services to Bali and Maroochydore as well as increased capacity to Vancouver, San Francisco and Los Angeles.

“Today I am also pleased to announce our first foray into South America, with a charter flight in September using our new all black Boeing 777-300.”

The flight will take the All Blacks and their fans to Buenos Aires for the first game against Argentina in the expanded Four Nations competition. Tickets and packages will go on sale in the coming weeks.

Rob Fyfe says the International Network review is nearing completion with further announcements to be made over the coming weeks as the airline focuses on strengthening its Pacific Rim network.

Air New Zealand also confirmed it has converted two options for Boeing 787-9 aircraft, taking its total order to 10. New contractual terms and a modified delivery schedule have been agreed with Boeing with the first expected for delivery in the second quarter of the 2014 calendar year.

“Despite the extremely frustrating and costly delays, we strongly believe the 787-9 is the right aircraft for Air New Zealand and worth the wait,” says Rob Fyfe.

Outlook
The trading environment remains uncertain and fuel prices have remained escalated. Given the 2012 financial year performance to date and the global economic environment, achieving last year’s result will be a challenge.

FY12 interim result key highlights
• Normalised earnings* before taxation of $33 million, down $79 million
• Net profit after taxation of $38 million, down $60 million
• Operating revenue up 2.5% to $2,291 million
• Number of passengers carried down 0.6%
• Net cash position of $912 million
• Interim dividend of 2 cents per share
• Net gearing at 49%, an increase of 2.3% from June 2011

Ends

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