Air NZ profit beats expectations

Old Aug 29, 12, 3:33 pm
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Air NZ profit beats expectations

Air New Zealand has reported net profit of $71 million, a 12 per cent fall on a year ago but ahead of expectations.

The company said a few minutes ago that the year to June 30 had shown a ''significantly'' stronger second half of the year.

Chairman John Palmer said the airline, majority owned by the government, was well positioned to continue the growth trajectory that it was pursuing until 2008 when the world was gripped by financial crisis.

"We have come through some tough times and the worst impacts of natural disasters like the Christchurch earthquake and tsunami in Japan are behind us, which means growth opportunities are no longer suppressed.

"We view the future with optimism and are pursuing a clear strategy to strengthen our Australasian operations, while being ahead of target in restructuring our International long haul network to improve financial performance," Palmer said in a statement to the NZX.

For the six months to December 31, Air New Zealand generated net profits of $38m, a 60 per cent drop on the same period a year earlier, struck by rising fuel costs and falling demand on its long haul services.

Outgoing chief executive Rob Fyfe said the airline had "implemented a broad suite of performance improvement initiatives that have touched every aspect of our business and we are currently ahead of the targets we set''.

In February Air NZ said it was targeting $195m in ''annual performance improvements'' by 2015. The airline said today the target had been raised to $250m.

Palmer gave a bullish outlook statement for the airline, predicting earnings could double over the next 12 months.
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The company has declared a final dividend of 3.5 cents per share, giving a total dividend for the financial year of 5.5c.
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Full story at stuff.co.nz
Still no word about the international route review nor whether international had stopped its losses.
Blackcloud is offline  
Old Aug 30, 12, 1:04 am
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Originally Posted by Blackcloud View Post
Still no word about the international route review nor whether international had stopped its losses.
I'd say from the text in their 2012 shareholder review and the breakdown of revenue by region from their annual report, they're still struggling to maintain the international services.
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Old Aug 30, 12, 1:23 am
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Originally Posted by aaronhowe78 View Post
I'd say from the text in their 2012 shareholder review and the breakdown of revenue by region from their annual report, they're still struggling to maintain the international services.
Struggling to maintain international services? Everything other than domestic services are international.

"New Zealand's long-haul travel has been strengthening during this period, and we expect that to continue through to Europe," chief executive Rob Fyfe told a media briefing.

Fyfe said a slowing Chinese economy is becoming more apparent which will have an impact on flights into and out of the world's most populous nation, and Air New Zealand has "built that in to our expectations for our forward plan."

Chairman John Palmer said the airline expects "to deliver a more-than 100 per cent improvement in normalised earnings before taxation in the 2012 financial year," which would take pretax profit above $180 million in 2013.
(NZ Herald)

I would say they know their markets, having reviewed international operations and re-directed their capacity to where they can maximise returns drives that view.
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Old Aug 30, 12, 3:51 am
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Well we're all reading between the lines since they didn't publish any explicit information on profitability by region; but since the section specifically dealing with "international" business (however you choose to classify it) was very cautious, I would posit that no matter how well they know their market, it's not their current strength.
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Old Aug 30, 12, 10:16 pm
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Long haul review

I doubt the much talked about long haul review report will be ever released to the public.
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Old Aug 31, 12, 7:58 am
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One of the questions that comes up on this forum persistently is whether NZ will start or exit long haul routes.

Historically as we all know airlines persisted with loss-making long-haul routes for years and decades because aviation was a somewhat government-directed and owned business. And although Air New Zealand is now largely government owned again its persistence on loss-making long-haul routes is not totally crazy. Airlines after all amortize the cost of aircraft over a decade or more, so taking a long view on other costs is sensible.

One presumes that with a lot of long-haul routes there are also long-term contracts with employees and the like that would be costly to exit (and perhaps even to reduce below a certain frequency). So the airline's decision on persisting with London or whatever other routes are in question is presumably that total exit now followed by re-entry in 201x would be far, far worse than persisting through some losses now and hoping that the world economy recovers.

Are they losing money on Shanghai? I would guess so. But it's not crazy to think that over 10 or 20 years a large country with whom New Zealand got an early free trade agreement will generate profitable air connections (even accounting for those years of early losses).

The more problematic market to me seems to be Japan, where the historic demand for tourism seems to be weakening, and the volume of trade between the two countries seems to generate less air traffic than with other trading partners.
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