FIRST CUT: Air New Zealand posts 24% decline in 1H profit as domestic competition mounts

Thursday 23rd February 2017

Air New Zealand posted a 24 percent fall in first-half pretax profit in the face of increasing competition into the domestic market.

Pretax earnings fell to $349 million in the six months ended Dec. 31 from $457 million in the same period a year earlier, the Auckland-based company said in a statement.

Net profit in the first half fell 24 percent to $256 million. Operating revenue was $2.22 billion versus $2.31 billion in the prior year. Basic earnings per share were 22.8 cents versus 30.1 cents in the prior period.

New Zealand's national carrier was forecast to post a 45 percent decline in first-half earnings to $186.5 million on a 2.6 percent decline in revenue to $2.63 billion, according to Forsyth Barr analyst Andy Bowley. Last month Craigs Investment Partners downgraded their price target for Air NZ shares to $2.09 on the prospect of weaker-than-expected earnings given increased competition among carriers and rising fuel prices.

While net profit was sharply lower, the airline said it was the second highest result for an interim period in the airline's history. "Passenger revenue was the main driver of the decline, as a significant level of new competitors entered the New Zealand market in the period," said chief executive Christopher Luxon.

The board declared a fully-imputed interim dividend of 10 cents a share, which is consistent with the prior period.

Based on the current market environment and expectations for the average jet fuel price in the second half of the year of US$65 per barrel, Air New Zealand said it is targeting 2017 earnings before taxation in a range of $475 million to $525 million.

The shares last traded at $2.15 and have fallen 6.7 percent over the past 12 months.

BusinessDesk.co.nz

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