Air New Zealand flying high with record NZ$262m profit

By David Flynn, August 27 2014

Air New Zealand has chalked up record pre-tax earnings of NZ$332 million (A$298 million) for the 2013-2014 financial year, representing a meaty 30% growth over its 2012-3013 results.

This delivers a net post-tax profit of NZ$262 million, the biggest take-home pot for AirNZ in a decade and also a very timely one, as the Kiwi carrier approached its 75th anniversary from the airline's 1940 founding as Tasman Empire Airways Limited, which ran a flying boat service between New Zealand and Australia.

It's also a large number for a relatively small airline, which underscores why Air New Zealand is one of only four airlines in the world to boast an investment-grade credit rating.

And the numbers should continue to head northwards as AirNZ streamlines and sharpens its fleet in the coming years.

The airline plans to retire its last gass-guzzling Boeing 747 jumbo jet in October and bring on two more of the fuel-efficient Boeing 787s this year and seven more from July 2015 to October 2017.

Read: Air New Zealand maps out Boeing 787 Dreamliner plans

Also in the chute are thirteen new Airbus A320neo and A321neo jets, due from late 2017 to 2019, to bolster AirNZ's competitive edge against Qantas on the trans-Tasman market.

The A320neo family partners new high-efficiency engines with refined aerodynamics – including new wingtip designs – to deliver a claimed 15 percent saving on fuel, along with lower operating costs and reduced noise.

AirNZ's Airbus A320neo fleet will take the trans-Tasman fight to Qantas

"As we grow our revenue and control costs, we generate strong financial results which lead to sustainable returns to shareholders and investment back in the business" said Air New Zealand CEO Christopher Luxon.

"A successful Air New Zealand is good for everyone – it is a virtuous circle."

Partners for growth

Luxon also talked up the airline's new partnership with Singapore Airlines , saying that "forming alliances with the right partners in the right markets is a key pillar of our Go Beyond strategy.”

This will see Singapore Airlines begin daily Airbus A380 flights between Singapore and Auckland from October 27, while AirNZ will restart daily services between Auckland and Singapore – a route it axed in 2006 – with one of the Kiwi carrier's refurbished Boeing 777-200ER jets.

"We'll be back flying to Singapore from January 6, and that is really exiting for us" Luxon said.

The airline is also considering partnering with an airline from Latin America, but Luxon says that this sits in the "longer-term" basket.

"I have spoken longer-term about the need for us to open up Latin America, and that still has ongoing analysis and work around it, but our focus for the medium term is really converting the opportunity (of the Singapore Airlines alliance) in Southeast Asia."

Air New Zealand's positive result stands in stark contrast to the fortunes or rather misfortunes of Qantas and Virgin Australia, which are this week expected to share in a record one billion dollar loss.

AirNZ is the largest shareholder in Virgin Australia, sitting on a 25.99% stake alongside boardroom partners but skyborne competitors Singapore Airlines (22.4%) and Etihad Airways (21.4%), each of which has its CEO sitting on Virgin's board

Qantas will present its report from 9.30am Thursday 28 August, with Virgin Australia following on Friday 29 August at 10am.

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