Air New Zealand says more cheap fares and domestic services after near-record profit

Thursday, 23 August 2018

Air New Zealand posts another near-record profit.

Air New Zealand posted its second-highest pre-tax annual profit and will pay a bonus of $1800 to permanent staff not in a short-term incentive programme.

The airline has copped criticism for pulling out of destinations such as Kāpiti, north of Wellington, but is promising further domestic growth with the announcement of plans to buy seven Airbus A321 Neo aircraft to fly high demand routes.

And passengers can look forward to more cheap airfares than ever over the next year.

'In 2019, we will offer more than 2.9 million seats for travel in New Zealand for under $100,' chief executive Christopher Luxon said.

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This year will also see the launch of new direct services to Chicago and Taipei from November, new services to Brisbane from both Wellington and Queenstown beginning in December, and a new third daily service added to the Auckland-Singapore route in partnership with Singapore Airlines.

Community and business leaders in regions abandoned by Air New Zealand say the airline's big profit means it should rethink how it runs its business.

The airline will also invest about $150 million in the next four years in aircraft cabins, digital products and lounges.

Profit after tax rose 2.1 per cent to $390m, while profit before tax was up 2.5 per cent at $540m.

Air New Zealand shareholders will receive an 11 cent dividend, bringing the total dividend to 22c per share, an increase of 4.8 per cent. The Government owns 52 per cent of the airline.

Chairman Tony Carter said the result demonstrated the airline's 'resiliency'.

Air New Zealand chief executive Christopher Luxon said issues with the Beoing 787 Dreamliners resulted service levels for some passengers were not up to standard.

'This is an impressive financial result, driven by strong revenue growth across the airline's key markets, as well as continued focus on sustainable cost improvement, despite significantly higher fuel prices.'

He said the airline achieving its second-highest profit in such a challenging environment 'really speaks to the focused strategy and unique competitive advantages that chief executive Christopher Luxon and his leadership team have spent years building'.

Air NZ will also invest $150m in the next four years in aircraft cabins, digital products and lounges.

'In recognition of the robustness of the 2018 result, the board has awarded staff bonuses of up to $1800 to be paid next week to approximately 8500 Air New Zealanders who do not have other incentive programmes as part of their employment agreement.'

Luxon said external disruptions had impacted the airline's operational performance and to improve reliability it would lease three more wide-body aircraft – two Boeing 777-200s and one Boeing 777-300 – as it continues to work through the maintenance requirements associated with the global Rolls Royce Trent 1000 engine issues.

Air New Zealand's 8500 staff stand to receive up to $1800 in bonuses.

'While we are very proud of the financial achievements of the 2018 financial year, I want to acknowledge the patience and loyalty of our customers who have been impacted by operational disruptions while travelling with us this year.

'These disruptions have resulted in a level of service for some that did not meet the high standards we set for ourselves.

'We do not take our customers' choice to fly with Air New Zealand for granted and remain focused on making improvements across all touch points of their travel journey,' he said.

But the airline also signalled next year could well be tougher, forecasting the pre-tax profit in the coming year could drop to between $425m and $525m as schedule changes resulting from issues with the Rolls Royce engines on its Boeing 787-9 Dreamliner fleet could cost an estimated $30m to $40m.

The airline is expecting to receive delivery of 10 Airbus A320 and A321 Neo aircraft, which increase seating capacity on trans-Tasman and Pacific Island routes.

Air New Zealand will be the first airline to fly the Airbus Neo in Australasia. Two Boeing 787-9 Dreamliners fitted with next generation Rolls-Royce Ten engines will also join the fleet.

Luxon said there were strong forward bookings heading into the peak summer season and over the next two years, the airline was expecting to grow by one million passengers a year, reaching 19 million passengers by the end of 2020.