AIR NEW ZEALAND (ANZ) boosted profits in its first half-year, despite continuing problems with its domestic Boeing 737 fleet and a rapid expansion of capacity on international routes.

The New Zealand carrier managed to raise net profits by nearly 60%, to more than NZ$140 million ($89 million) in the six months to the end of December. Chief Executive Jim McCrea says, that the airline is comfortably on course to beat 1994's result, of NZ$191 million for the full year to June.

McCrea points to a strong performance on international routes, where ANZ managed to post a real improvement in yields, despite the strength of the New Zealand dollar and heavy capacity expansion.

Overseas ticket sales were up by around one quarter in most Asian and American regions, with Europe only marginally behind, at 16%. The growth would have been higher, but for the strong currency, says McCrea. The result came from a healthy international traffic growth of 22%, he adds.

Capacity grew at an even faster 25%, as new aircraft joined the fleet towards the end of the year. Two Boeing 767-300s were brought in to replace older and smaller leased 767-200s and the carrier took out a medium-term lease on a Boeing 747-400 for use on long-haul Pacific routes. A 747-200 has also been leased for five months.

Domestic performance also improved, but ANZ says that the domestic 737 operations "...continue to provide inadequate returns on the significant investment involved". The carrier has since grounded ten of its 13 hushkitted 737-200s after turbine-blade failures.

McCrea also admits that the carrier's regional development is "overshadowed" by Australia's decision in October to freeze its open-skies agreement with New Zealand. "The New Zealand Government continues to remind Australia that the matter is neither forgotten nor off the bilateral agenda," he warns.

Source: Flight International