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Air NZ earnings under pressure

By Phil Boeyen, ShareChat Business News Editor

Wednesday 1st November 2000

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Air New Zealand is warning of lower trading profits for the current year after suffering the double blow of higher fuel costs and a weak currency.

Air NZ chairman, Selwyn Cushing, told the company's AGM today that the first quarter profit is well behind budget and the airline does not expect to gain any relief from adverse fuel prices and foreign exchange impacts in the near future.

"The first half will be disappointing but the second half should benefit from a number of initiatives we have underway. However we estimate that for the full year the group's trading profits will be substantially lower than last year."

Mr Cushing says if current price levels are sustained, then fuel costs will be more than US$100 million over budget for the year.

"After reviewing prevailing trading conditions at our board meeting today, your directors considered it was important to update you of their view on the group's earnings outlook for FY200l which is under pressure. It is not possible in this industry to quantify the outcome in dollar terms."

The airline is also being squeezed by price competition from new entrants in Australia, where its Ansett subsidiary operates, and on the trans-Tasman route.

Mr Cushing says in recent months the company has been vigorously pursuing strategies to try to counter the higher fuel prices and negative exchange rates, and he reminded shareholders that the group will gain significant financial benefits once Ansett is fully merged with Air New Zealand.

"As a result of our purchase of Ansett, we are strengthening the group which now has the scale and regional market presence, not to mention the immensely valuable Star Alliance Network connections, to be an increasingly successful player in this industry."

Last year Air NZ improved its net trading result before abnormals by 33% to $178 million, but a one-off adjustment meant the company posted a deficit of $600 million for the year.

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