Air New Zealand's Profit Drops 47%
By Geoffrey Thomas, Air Transportation World | Aug. 28, 2006
Air New Zealand described its full-year result as "solid" in a "challenging environment," with a net profit decline of 48% to NZ$97 million ($61.7 million) for the year ended June 30 from NZ$180 million in the prior year.Chairman John Palmer said, "We clearly acknowledge this is not the result we would have liked to have achieved at the end of the financial year. But given the extraordinarily challenging business environment the airline is operating in, this is a respectable result."
As with all carriers, ANZ's bottom line has been jolted by fuel costs, in this case a hike of 44% or NZ$275 million. But it also incurred costs related to the refurbishment of its 747s (ATWOnline, June 19) and introduction of the 777-200ER and Q300. It completed a total makeover of its inflight product and restructured management and maintenance (ATWOnline, Feb. 22), but CEO Rob Fyfe warned there is more pain to come.
"There are still more tough strategic workforce and workplace decisions to be taken to ensure Air New Zealand meets its potential. We cannot solely hide behind fuel price increases as the excuse for our decrease in profitability," he said.
Revenue was up 5% NZ$3.8 billion with a solid 6% yield improvement to NZ$0.12 per RPK. Key to that gain has been the makeover of its long-haul product, which won it ATW's Phoenix Award in 2005 (ATW, February 2005).
Higher fuel prices led to total expenses, excluding borrowing costs, increasing 7% to NZ$3.7 billion. ANZ carried 11.9 million passengers, up 2% on the previous year, while ASKs grew 1% to 34.05 billion and RPKs remained static at 25.55 billion, resulting in a 1-point decline in load factor to 75%.
The company's financial position remains strong, with net cash of NZ$1.15 billion and net debt at NZ$203 million. The board elected to repay NZ$245 million of debt, initially scheduled for repayment over the next three years, early in the 2007 financial year.
Looking ahead, ANZ said that "challenging times remain," in part because of a "softening" national economy and a weakening currency against the US dollar, which is good for long-haul revenue but problematic for leasing, fuel and MRO costs. "The airline won't escape the impact of high fuel prices, and these will heavily influence the level of Air New Zealand's profitability in the 2007 financial year," it said.