Air NZ optimistic about outlook

Despite losses and market volatility, Air New Zealand is predicting improved fortunes.

Air New Zealand made a profit of $112 million over the first six months of the 2011 financial year. But there was a loss of $37 million in the second half resulting in normalised earnings for the full year of $75 million before tax.

Air New Zealand chairman John Palmer said at yesterday’s AGM the company remained in a healthy financial position. Net gearing improved 0.6 percentage points to 46.7% and net cash is strong at $860 million, due to the purchase of fixed assets and Virgin Australia shares. This is a 19% decrease on the prior year.

Mr Palmer said the last six months had been the most operationally and financially challenging time during his tenure as chairman so far.

Virgin Australia
Air New Zealand began a trans-Tasman alliance with Virgin Australia in July this year. It now has a 19.99% stake in Virgin Australia.

In a stock market announcement about the increased interest made earlier this week, Air New Zealand chief executive Rob Fyfe said the stake in Virgin Australia provided Air New Zealand access to opportunities in the growing Australian domestic market. “Air New Zealand has no intention to enter the Australian domestic market in its own right.”

Mr Palmer confirmed at the AGM yesterday that Air New Zealand did not plan to increase their stake further. The current figure is the limit of the Australian Foreign Investment Review Board approval for purchase.

But Mr Fyfe said one of Air New Zealand was intending to explore opportunities to further develop this relationship, including potentially seeking a board position.

Looking ahead
Mr Palmer said short haul was performing well. “We expect a better performance in the international long haul network as outcomes of the review of the long haul network start to be implemented and we gain greater efficiency from the new Boeing 777-300ER fleet.”

While acknowledging currently volatile market conditions, he said an improved result was expected for the 2012 financial year, “contingent on fuel price levels and global economic conditions.”