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Daily ShareChat: Air NZ

By Jenny Ruth

Tuesday 5th October 2010

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 Jenny Ruth


Air New Zealand's profit outlook is positive despite the tough economic conditions, says Rob Mercer at Forsyth Barr.

"We expect profitability to increase sharply over the next couple of years" and will peak in the year ending June 2012, Mercer says.

"The improvement in earnings is already evident in the recently released August 2010 operating stats and the confident outlook statements made by Air NZ at its 2010 result in late August."

Among the airline's positives is it is increasing capacity as its competition is pulling back, it has the first of three new B777:300 aircraft arriving between November and March 2011, stable fuel prices and a return of growth from inbound tourist arrivals, Mercer says.

The 2011 Rugby World Cup will also help. Mercer esitmates windfall revenue over the four months surrounding the cup from long-haul markets will be about $345 million which will contribute between $25 million and $50 million in profit.

It has also signed up new partners for its Airpoints offering including FlyBuys, BNZ, ANZ/National, Kiwibank and American Express.

He is forecasting Air NZ's normalised net profit will rise from the $92 million it reported for the year ended June 30 to $160 million in the current year and to $258.7 million in the year ending June 2012.

Recommendation: Buy.

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