Air New Zealand is paying out a 6.5c (NZD) dividend after pre-tax underlying earnings rose by 20 per cent to NZ$216 million in the first half of the airline’s 2015 financial year, despite statutory net profit after tax dropping by 6 per cent to NZ$133 million. A significant part of the reduced profit was NZ$14 million in losses from its 25.9 percent holding in Virgin Australia, for which Air NZ had to account. The dividend is an increase of 44 per cent over the previous corresponding period.
Both chairman Tony Carter and CEO Christopher Luxon are bullish about the airline’s fortunes, not least because of relatively low fuel prices compared with recent years.
Air New Zealand gave guidance in November that if fuel prices continued low, there would be a significant additional improvement in earnings in the second half of the financial year, and the airline’s chairman is reinforcing that message today.
“Fuel prices are lower than in November and the sales momentum has been maintained, further strengthening the company’s outlook for the current year and beyond,” Tony Carter said.
The airline was clear about how it will achieve its goals when illustrating today’s results.
“We are a small airline and will continue to punch well above our weight as we strive to become a truly great company. To us, this means delivering on three major goals at once – superior commercial results, continuing to enhance the customer experience and further developing our people and culture. These three goals are equally important, and my Executive team and I are focused on continuing to deliver on all of these,” Christopher Luxon explained.
Luxon highlighted new international routes as key to the airline’s strategy.
“We recently recommenced flights on the Auckland-Singapore route as part of our alliance with Singapore Airlines – a key part of our Pacific Rim growth strategy, providing our customers with not only a convenient direct service, but great connectivity into South East Asia and markets beyond,” he said.
Luxon concluded: “We have also announced plans for our first ever scheduled services to South America, flying direct to Buenos Aires, Argentina from December this year. Tickets go on sale soon, and this will become our 28th international destination, opening up exciting new possibilities for customers travelling between South America, New Zealand, Australia and Asia.”
Not announced today was any detail or progress report on the airline’s much-rumoured addition to its North American network, to join Los Angeles, San Francisco and Vancouver in the Air New Zealand long-haul network. The airline also serves Honolulu as part of its trans-Tasman/Pacific Islands network using its Seats to Suit fare structure. Chicago, Houston and Las Vegas were all cited by the airline as options in December last year.
Closer to home, CEO Christopher Luxon confirmed that the focus is on competitive pricing. Air New Zealand faces competition across the fare and passenger experience spectrum from Jetstar, Qantas and Emirates, which has Auckland as its largest A380 focus city outside Dubai given its tag flights from Sydney, Melbourne and Brisbane.
“Whether it be here in New Zealand, on the Tasman, to the Pacific Islands or on our extensive long-haul network, Air New Zealand customers can expect to see even more competitive pricing. Initiatives like the reintroduction of the popular Night Rider service and its extension to regional New Zealand have been a hit, as have Grabaseat’s low priced long-haul fares to destinations like Los Angeles and Tokyo,” Luxon said.
The airline also noted that it expects to spend NZ$3 billion on aircraft capital expenditure over the next six years. Air New Zealand’s orders are currently split between the two major airframers. Airbus will deliver thirteen A320neo and A321neo narrowbody aircraft from 2017 to replace existing airframes on short-haul international routes, with additional A320ceo aircraft due to arrive to supplement the domestic fleet and complete the replacement of domestic Boeing 737 services. Boeing is expected to continue delivering the remaining nine aircraft in Air NZ’s 12-strong 787-9 Dreamliner order.
Overall, the airline appears in good shape in its 75th anniversary year, with bond credit rating house Moody’s confirming the airline’s Baa3 medium investment grade credit rating with a stable outlook.