Air NZ Half-Year Results; Will Improve Trans-Tasman Service

At Air NZ’s half-year financial results, CEO Rob Fyfe announced his carrier will make undisclosed improvements to itsTrans-Tasman product. The carrier will start to unveil the improvementsin mid-March, after which Fyfe said competitors would be “scrambling to catch up”.

The improvements come as Air NZ faces “unstable market dynamics” on the Trans-Tasman market, as Fyfe characterized it. He said demand was down2.9% and the carrier cut 10.5% capacity. Air NZ faces increased competition, primarily from non-full-service carriers Jetstar and Pacific Blue.

It seems likely then the improvements will aim to increase passengers’ perceived value of Air NZ’s full service, thus wooing them away from Jetstar and Pacific Blue–or stopping a further exodus. It’s unlikely Jetstar and Pacific Blue would improve their product since it is tied to offering passengers the lowest fare.

The Trans-Tasman improvements, new cabin design, and introduction of more A320s will make the next twelve months “one of the most defining”in Air NZ’s history, Fyfe remarked.

Financial results summary:

  • Normalised earnings* before taxation of NZ$96 million, up $70 million from the same period last year

  • Normalised earnings* after taxation of $64 million
  • Operating revenue down 15% to $2.1 billion
  • Passenger demand down 4.6%
  • Passenger load factor up 3 percentage points to 81.6%
  • Net cash position $1.1 billion
  • Interim dividend of 3.0 cents

* Normalised earnings exclude the impact of derivatives that hedge exposures in other financial periods.

Fyfe said other carriers have approached Air NZ asking to license its premium economy seats, but said “They’ll have to wait a little while.”

At the end when there were no further questions, one NZ reporter asked Fyfe about the carrier’s claimed drink-driving problem. Fyfe declined to comment, saying the conference was about financial results. “We are not dealing with those issues”, he said. Ouch.

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