Air New Zealand Outperforms Airline Industry In 2009
Air New Zealand today announced normalised earnings* before taxation of $145 million for the year ended 30 June 2009, a decrease of 26% on the prior year.
Despite deteriorating economic conditions, Air New Zealand’s financial performance in the second half of the year improved dramatically against normalised earnings before taxation at the half year of $26 million.
Operating revenue for the year was $4.6 billion, down $58 million or 1.2% on the same period last year, with passenger revenue down $74 million on a 7.6% decrease in demand, as measured in revenue passenger kilometres.
“This result positions Air New Zealand as one of the top airline performers globally but it falls short of delivering shareholders an appropriate commercial return,” says Chairman John Palmer.
“Air New Zealand’s profitability against the backdrop of a global economic meltdown was underpinned by management’s decision to move rapidly ahead of competitors to reduce capacity at the first signs of waning demand and an ability to continue to invest and innovate with confidence.”
After reviewing the current trading environment and the airline’s financial position, the Board has declared a fully imputed dividend of 3.5 cents per share. This reflects the 2009 operating performance, while acknowledging that economic conditions remain challenging throughout the next financial year. The dividend record date is 11 September 2009.
Air New Zealand Chief Executive Officer Rob Fyfe says the airline will continue to act quickly and decisively, with a strong emphasis on innovation, to remain ahead of competitors.
“We will continue to invest in new products, technology and customer service, while keeping a strong focus on reducing costs and becoming even more efficient. No area of the business will be immune from change as we start to roll out exciting new developments in our domestic, Tasman and long haul airlines and capitalise on opportunities for our subsidiary businesses.”
Mr Fyfe says that while some certainty is provided by hedge positions relating to foreign exchange and fuel price, demand remains difficult to predict.
“Although there are some early indicators that the slump in travel demand may be showing signs of having bottomed out, it would be naïve to think that there won’t be bumps on the road to economic recovery. Nevertheless, Air New Zealand is well positioned to move quickly to increase its share of the travel dollar in all markets we choose to operate in. Our ability to execute innovative marketing, continue to invest in our destinations and deliver a world-class and uniquely Kiwi experience stands us apart from the competition.”
Outlook
Few airlines are making profits and even fewer are paying dividends, so our result is a positive one in the global airline context.
The current operating environment is likely to remain turbulent, a fact supported by the International Air Transport Association’s (IATA) prediction that global airline losses will total US$9 billion in the 2009 calendar year. These losses are underpinned by weakened demand and significant global over capacity.
The Australasian market is not immune from this and until supply is aligned with demand the airline sector will not achieve a satisfactory commercial performance.
While demand is stabilising, yields remain under significant pressure, fuel prices have resumed an upward trend and we are unlikely to achieve the same level of net hedging gains. The same agility displayed in the 2009 financial year will be imperative throughout the next year.
Key highlights
- Normalised earnings* before taxation of $145 million
- Normalised earnings* after taxation of $118 million
- Operating revenue down 1.2% to $4.6 billion
- Passenger demand down 7.6%
- Net cash position $1.6 billion, up 22%
- Final dividend of 3.5 cents
* Normalised earnings exclude the impact of derivatives that hedge exposures in other financial periods.