Air NZ profit slumps 79% as demand slump cuts margins

By Paul McBeth

Thursday 26th February 2009

Air New Zealand, the country's national carrier, posted a 79% slump in half-year profit as falling demand and rising fuel prices cut into the airline's margins.

Net profit plummeted to $24 million for the six months to December 31, from $115 million a year earlier, the company said in a statement. Fuel costs jumped 69% to $948 million and total passengers carried to 6.3 million from 6.6 million. Operating revenue rose 3.7% to $2.42 billion.

"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," said chairman John Palmer. "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."

The carrier cut its interim dividend 40% to 3 cents per share. Its stock rose 1.2% to 82 cents in early trading on the NZX 50.

The airline has established a team to reduce spending across all areas of the business, as it seeks to "minimise the need for further redundancies", said chief executive Rob Fyfe.

Fyfe said the airline will vigorously defend its market share in trans-Tasman and domestic markets. JetStar Airways, Qantas' discount airline, announced it would expand its New Zealand services this month.

With the global economic slump slashing the value of assets worldwide, the national carrier intends to seek out small-to-medium sized investment opportunities in the tourism and aviation sectors, Fyfe said.

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