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Accounting changes mean $600M loss for Air NZ

By Phil Boeyen, ShareChat Business News Editor

Tuesday 29th August 2000

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Air New Zealand has announced an improved trading performance for the past year but accounting changes mean it has posted an after tax loss of more than $600 million.

The airline says for the year to the end of June its net profit after tax but excluding abnormals rose 33.6% to $177.9 million.

Group revenue lifted nearly 11% to $3,723.7 million thanks to increased international inbound traffic, benefits from foreign exchange rate changes and an improvement in the airline's domestic market position.

The company says expenses were "constrained" to an 11% increase despite significantly higher fuel prices, compounded by adverse foreign exchange rate movements. It says the lower exchange rate also had a negative impact on other foreign currency expenses like aircraft leasing and US$ interest costs.

In finalising this year's results Air New Zealand says it has adopted the comprehensive method of accounting for deferred tax instead of the partial basis which is used by many other airlines, including Singapore Airlines and British Airways.

It says the effect of the change is a one-time charge of $786.2 million, and that has resulted in an overall after tax loss of $600.1 million for the year. However the airline points out the accounting change is a non-cash transaction and does not change its underlying financial strength or performance.

In announcing its yearly result Air New Zealand says it will be proceeding with a renounceable pro-rata rights issue to shareholders in October this year to raise around $285 million.

In terms of future business the airline says inbound demand for air travel to NZ and Australia is expected to continue to grow at encouraging levels, bolstered by the gathering strength of economic recovery in Asian markets and the high profile of the Olympic Games in Sydney.

However it says the weaker Austrlian and New Zealand currencies will hold back growth in outbound demand from the region.

A 9 cent dividend has been declared.

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