Air NZ half year net profit rises 61%, announces special div

By NZPA

Tuesday 27th February 2007

Air New Zealand, 80% owned by the Government, today reported a 61% rise in its December half year net profit to $74 million.

It posted a 3 cents per share interim dividend, up from 2.5c last year, as well as saying it would pay a special dividend of 10 cents per share.

Chairman John Palmer said analysts' expectations for the full year profit of $204m to $232m were realistic.

Air NZ shares jumped 7c to a three-year high of $2.21 on the result and special dividend news.

All key metrics, including yield, passenger numbers, revenue, profitability and share price were up, despite significant external pressures, Palmer said.

Jet fuel continued to be the company's most significant cost. The average price of fuel was up 13% over the last year, and 55% over the same period two years ago.

In 2003 the airline embarked on a substantial $2.6 billion capital investment programme, and followed that by seeking to strengthen its balance sheet through a capital raising to shareholders.

That programme had finished its first stage, with the gearing at a comfortable 46.7% and so the airline was in a position to return funds to shareholders.

The special dividend will cost $105m.

The company had cash of over $1 billion despite repaying $140m of debt early.

"Although the operating environment is still very challenging, we feel confident now about the ability to release some of the cash holdings from the balance sheet," Palmer said.

The Government had no plans to sell down its shareholding, he told a briefing.

Palmer said that despite the encouraging performance, the airline's returns were still below their potential.

"The board's view is that we are not yet achieving the levels of performance we consider appropriate to properly reward shareholders for the capital employed and associated investment risk."

Chief executive Rob Fyfe said priorities for the business over the next six months included clarifying the future operating model for Airport Services, growing the domestic business, consolidating its position on the Tasman and stimulating demand for the new Vancouver service, which will launch in November.

Over the six months Air NZ had cut costs by $63m and was on track to achieve targeted cost savings of $130m for the full year.

A four-year cost-saving programme had originally aimed to take $245m of costs out of the business but by the end of the year it now expected to have trimmed $326m in annualised savings.

Operating revenue rose 12% to $2.14 billion with group passenger yields up 10.7%.

Short-haul passenger revenue increased 11% to $1.02b with yields also up 8.9%.

Long-haul passenger revenue increased 13% to $695m, with yields up 12.7%.

Cargo revenue rose 20% due to the increased capacity offered by new Boeing 777 planes and higher cargo yields.

Comments from our readers

No comments yet