Air New Zealand profit down due to recession

Air New Zealand today announced normalised earnings* before taxation of $26 million for the six-month period ended 31 December 2008, a decrease of 84 percent on the same period last year. Net profit after tax was $24 million, down 79 percent.

Operating revenue increased by 3.7 percent or $87 million on the same period last year to $2.4 billion for the first half of the year. Foreign exchange movements contributed to $75 million of this improvement. The Board has declared a fully imputed interim dividend of three cents per share. While this is lower than the 2008 interim dividend, it does reflect the Board's confidence in the ability of the company to generate returns to shareholders despite tough conditions. Air New Zealand Chairman John Palmer said the past six months has been one of the toughest periods airlines have faced. "Fuel costs reached unprecedented levels in 2008, with the average spot price increasing 36% on the same financial period last year adding an extra $211 million to the fuel bill. This combined with the deterioration in both passenger and cargo demand, as the global credit crisis intensified, has seen the airline deliver an unsatisfactory financial result, despite the management team's best efforts." Air New Zealand remains in a strong financial position. "Even though the New Zealand dollar has weakened, our foreign exchange hedging programme has shielded us from the full effects, allowing us time to adapt our business. We continue to enjoy a modest gearing level, strong liquidity levels and low capital commitments for the next two years. We have been able to continue investing in the business in areas such as domestic airports, engineering and innovative distribution to make us even more competitive." Chief Executive Officer Rob Fyfe said the key priority remains closely matching supply to demand, while striving to be the market share leader in all our chosen markets. "In the first half of 2009, we have taken a proactive approach to capacity management that has been more agile and disciplined than in past industry downturns. In these challenging times, it is not the largest airlines that will outperform, but the ones most responsive to change. "In the last quarter of the financial year we aim to reduce long haul capacity by 14 percent compared with the same period last year. "To address excess staff levels due to capacity reductions, we announced in November that we would disestablish up to 100 long haul cabin crew positions. We continue to work hard on a series of initiatives to minimise the need for further redundancies. These include pilots taking leave without pay, giving staff on individual contracts the opportunity to work fewer hours, introducing part-time hours for cabin crew, not replacing non-safety sensitive roles, not renewing temporary contracts and a freeze on executive salaries." Air New Zealand is also continuously reviewing all areas of expenditure and has established a team who are well underway identifying and reducing discretionary spend across all areas of the business. Mr Fyfe said it remains critical for the airline to invest in product and service to retain and grow market share.