Bullish outlook for Air New Zealand

Chairman predicts earnings could double over the next 12 months.

Air New Zealand shares (NZX: AIR) leapt 11.5 cents yesterday to $1.01 with a prediction they could soon approach $1.10.

Airline chairman John Palmer followed up the announcement of a  full-year profit-dip with a bullish outlook statement.

After a strong pick-up in earnings over the second half of the year, Mr Palmer predicted earnings could double over the next 12 months.

"Despite the uncertain global economy, assuming our current forecast of market demand and fuel prices at current elevated levels, we expect to deliver a more than 100% improvement in normalised earnings before taxation in the 2012 financial year."

The airline this morning reported a net profit of $71 million this morning for the year to June 30 – down 12% or $10 million on the same time last year, beating the consensus analyst forecast of $44.5 million.

Earnings before tax increased 21% to $91 million.

Air New Zealand's 13% share price leap was on trading of almost 800,000 shares.

The shares have fetched between 80c and $1.14 in the last year. 

Forsyth Barr analyst Rob Mercer says Air NZ's result, along with its profit guidance, should help drive its share price towards $1.10 "in the near term".

"While AIR continues to face ongoing challenges, it has emerged in great shape and the board has had the confidence to outline profit guidance for its normalised EBT to more than double in FY13," he says in a note released this afternoon.

This was the last annual result under the leadership of chief executive Rob Fyfe, who is being replaced internally by Christopher Luxon at the end of December.

Mr Palmer says the airline’s outlook for the year ahead is a testimony to Mr Fyfe’s time in the business.

Changes made under his watch are now starting to show dividends and Mr Fyfe has left the airline in good heart.

“That’s the best legacy a CEO can leave,” Mr Palmer says.

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