Photographer: Brendon O'Hagan/Bloomberg

Air New Zealand First-Half Profit Soars as Expansion Pays

  • Airline expects full-year earnings to surge more than 70%
  • Growth underpinned by increased capacity, cheaper fuel

Air New Zealand more than doubled first-half profit and said it expects full-year earnings to surge at least 70 percent as lower fuel prices and growing passenger numbers boost revenue.

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Net income jumped 154 percent to NZ$338 million ($225 million) in the six months to Dec. 31, the Auckland-based airline said Thursday. Pretax earnings climbed to NZ$457 million. The airline increased its first-half dividend to 10 cents per share from 6.5 cents.

Air New Zealand is in expansion mode, adding international destinations in the Pacific Rim, Asia and the Americas and also increasing capacity domestically. The airline is targeting full-year pretax earnings of more than NZ$800 million from NZ$474 million a year earlier, it said today.

“We are delighted to start off 2016 with such a stellar performance,” Chairman Tony Carter said in a statement. “Air New Zealand’s profitability, healthy free cash flow and solid balance sheet reflect the successful execution of the strategic plan by CEO Christopher Luxon and the executive team, which is focused on sustainable and profitable growth.”

First-half passenger revenue jumped 16 percent to NZ$2.3 billion, driven by increased capacity and strong demand, while operating revenue rose 12 percent to NZ$2.7 billion.

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Lower fuel prices boosted pretax earnings by NZ$184 million, Air New Zealand said. The airline is also getting a boost from its 25.9 percent shareholding in Virgin Australia, which after years of losses contributed NZ$15 million to the half-year result.

Air New Zealand shares rose 1.5 cents to NZ$2.88 at 11 a.m. in Wellington after earlier rising as high as NZ$2.955. The stock has gained 75 percent since November 2013, when the government, which bailed out the airline in 2002, sold down its shareholding to 53 percent.

Air New Zealand said it will increase capacity by 7 percent in the second half and by as much as 10 percent next year. Still, Carter said the airline recognizes “that in this period of lower fuel prices, the operating environment will become more competitive.”

Qantas Airways Ltd. unit Jetstar has expanded its operations in the domestic New Zealand market, while international carriers are opening new routes to the South Pacific nation.

Luxon said Air New Zealand will continue to build its presence in Australia.

"New Zealand continues to be not only a destination that is in big demand for Australians but it is also a gateway to North America, South America and the Pacific Islands for travelers from Australia,” he said. “This traffic is adding to the strength of Air New Zealand’s services to these markets.”

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