AirNZ posts $318.5 million full year loss

By NZPA

Wednesday 28th August 2002

Air New Zealand today posted a net after tax loss of $318.5 million for the full year to June 30.

The company, whose shares last traded down two cents at 62 cents, did not declare a dividend.

Air New Zealand is 82 percent owned by the Government since an $885 million rescue package was finalised early this year.

The result included a one-off charge of $389 million relating to its failed investment in Australian carrier Ansett, which had previously been announced in the company's first half result.

Other unusual items included a $34.6 million reduction in liability resulting from a revaluation of the deferred consideration payable to News Corp in regard to Ansett, a charge of $52.6 million arising from a change to the accounting treatment of the Airpoints Frequent Flyer scheme, and a tax credit of $6 million.

After tax and before unusual items the company recorded an operating profit of $39 million.

Four analysts surveyed by Multex Global Estimates had expected Air NZ to post a pre-abnormal net profit of between $3.8 million and $75.4 million for the year.

Last year the demise of Ansett made a $1.3 billion hole in Air NZ's balance sheet and dragged it to New Zealand's largest ever corporate loss -- $1.4 billion for the June 2001 year.

Air NZ chairman John Palmer said the airline's financial performance in the last financial year was better than anticipated in the business plan produced to support the recapitalisation of the company.

"We have pulled out of a nose-dive. But we still have a very long way to go before we can say we are on a stable flight path and satisfactory returns are assured," Mr Palmer said.

"The battle to achieve acceptable commercial returns is far from over."

Air NZ said today it could record core earnings of more than $100 million in the 2003 year, but added that it was difficult to forecast results with any degree of certainty.

"Earnings before interest and tax of more than $100 million are achievable -- though a significant challenge if current circumstances continue," Mr Palmer said.

After adjustments to remove the impact of Ansett from the company's 2001 financial year result, the company's total revenue declined by 9.5 percent to $3.6 billion, compared with the previous year's $4 billion figure -- due largely to decreased overseas travel in the wake of the September 11 attacks in the United States.

Operating expenses fell by 11.3 percent to $2.95 billion from $3.3 billion in 2001, supported by favourable foreign exchange rates, fuel prices and business re-engineering.

ABN Amro Craigs head of equities Bryon Burke said the operating result was perhaps slightly ahead of expectations and the writedowns were largely as expected.

"The result side of it is probably not too bad," Mr Burke told Reuters.

But he said the company's share price had fallen this morning as the outlook painted by the airline was "not the rosiest of pictures".

Air NZ shares last traded down four cents at 60 cents, against a low of 30 cents struck in January and a year high of 76 cents. Most analysts view the share price as over-valued.

Little of the stock is freely traded, after taking into account the Government's stake, BIL International's 5.5 percent stake and Singapore Airlines' 4.5 percent.

Future ownership of the airline remains a key issue, with talks continuing between Air NZ and Qantas over the Australian carrier taking a minority stake of up to 25 percent.

Both airlines have said they see strategic value in a relationship, but no decisions have been made. Any deal between the pair would face significant regulatory and competition hurdles.

Mr Palmer declined to comment on the progress of the talks today.

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