Air NZ rides the tourism boom with record full-year earnings   26 Aug 2016

Air NZ rides the tourism boom with record full-year earnings

By Fiona Rotherham

Aug. 26 (BusinessDesk) - Air New Zealand has ridden the tourism boom and staved off increased competition to deliver the best full-year earnings in its 76-year history.

Earnings before other significant items and tax was up 70 percent to $806 million in the 12 months ended June 30 while pre-tax profit of $663 million increased 40 percent, the Auckland-based company said in a statement.

Significant items of $143 million included a $83 million writedown on the carrying value of its shareholding in Virgin Australia after it retained just 2.5 percent of its stake during the financial year, and $57 million relating to legal costs and settlement of a class action compensation claim in the US relating to global airline anti-competitive conduct in the air cargo business.

Shareholders are being rewarded with a one-off special dividend of 25 cents per share on the top of a final dividend of 10 cents per share, taking total ordinary dividends to 20 cents for the year.

And around 8,500 employees will next week be paid a company performance bonus of up to $2,500 for those not covered by other incentive programmes.

Chairman Tony Carter said the airline’s staff are critical to its success.

“We recognise the importance of working collaboratively with our unions through our high performance engagement programme to achieve results that benefit both our business and our people. This has been an important contributor to our ability to achieve efficiencies,” he said.

Chief executive Christopher Luxon said the airline ended the year with customer satisfaction at record highs, staff culture continuing to improve, and the best financial results in its history.

“Alongside connecting New Zealanders and Kiwi businesses with each other and the world, we employ 11,300 staff, will pay the government around $260 million in total dividends and will pay income tax of around $200 million for the year.”

But the outlook is less rosy with increased competition from a growing number of international carriers adding capacity in response to New Zealand’s tourism boom and the threat of rising fuel prices. Due to those factors, the airline has forecast operating earnings for the 2017 financial year in the range of $400 million to $600 million.

Aircraft capital expenditure is expected to be $2.1 billion over the next five years.

The airline paid down debt during this financial year with gearing at 48.6 percent, an improvement of 3.8 percentage points and net debt reduced to $702 million from $826 million the previous year. Including its operating lease commitments, which are off balance sheet items, net debt reduced to $1.99 billion from $2.15 billion.

Passsenger revenue was $4.5 billion, up 8.9 percent, while cargo improved to $349 million compared to $317 million the prior year. The airline appears to have held off competition from Jetstar on regional routes reasonably well with New Zealand revenue of $2.98 billion compared to $2.91 billion the prior year and passengers carried domestically at 9.7 million compared to 9.2 million in 2015.

The big gains were in the America/Europe markets with revenue at $330 million compared to $286 million the previous year following the start of direct flights to Houston, Texas in April last year and passenger numbers in that market rising to 1.14 million from just over 1 million the prior year.

Air New Zealand shares last traded at $2.23.

This week Air NZ’s Australian rival Qantas delivered a record A$1.5 billion full-year profit and resumed paying dividends after a seven-year drought, handing out A$500 million to shareholders through a 7 Australian cents per share dividend and a share buy-back.

(BusinessDesk)

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