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Air NZ first-half pretax profit rockets 132% on lower fuel prices, tourism

Thursday 25th February 2016

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Air New Zealand posted a 132 percent increase in first-half pretax profit as the country’s national airline carrier benefits from lower jet fuel prices, efficiencies from its new fleet, and a rise in tourist numbers.

Pretax earnings rose to $457 million in the six months ended Dec. 31, from $216 million a year earlier, the Auckland-based company said in a statement. The company forecast earnings of $400 million, excluding any equity accounting contribution from its 26 per cent stake in Virgin Australia, at its annual meeting last October.

Net profit in the first half rose 154 percent to $338 million. Revenue rose 12 percent to $2.7 billion on the back of a 10 percent rise in domestic passenger demand as it added capacity to meet Jetstar’s competition on regional routes.

Chief executive Christopher Luxon said on the long-haul network it was pleased with demand and performance on new routes to Houston and Buenos Aires. Starting in June, it is launching seasonal services to Vietnam.

Chairman Tony Carter said it was a stellar performance in the first half.

“Air New Zealand’s profitability, healthy free cash flow and solid balance sheet reflect the successful execution of the strategic plan by CEO Christopher Luxon and the executive team, which is focused on sustainable and profitable growth,” he said.

Air New Zealand’s stake in Virgin and its share of the Christchurch Engine centre earnings contributed $15 million and $10 million respectively for the first half.

The board declared a 10 cent fully imputed interim dividend, with a March 11 record date, payable on March 19.

The board also forecast that based on current market conditions and fuel prices, earnings before tax for the full 2016 financial year are likely to exceed $800 million, excluding Virgin earnings.

The shares last traded at $2.86 and have gained 10 percent this year.

Earlier this week Australia’s biggest airline Qantas Airways, Air New Zealand’s main competitor on the trans-Tasman route and domestically through its budget offshoot Jetstar, posted a record first-half profit of A$688 million, up from A$203 million in the previous half due to revenue growth, lower fuel prices, and further benefits from its A$2 billion transformation programme.

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