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Air NZ delivers small rise in full-year profit as fuel bites

Air New Zealand reported a 1.9% rise in full-year operating profit of NZ$1.29 billion ($862 million), despite contending with a net NZ$135 million increase in fuel costs.

Operating revenue for the year to 30 June increased 7.4% to NZ$5.5 billion, as both cargo and passenger revenues showed strong growth. RASK excluding the impact of foreign exchange was up 1.8% as RPKs increased 5.3% on capacity growth of 5%.

The carrier noted that demand on is domestic and transtasman route exceeded expectations, while Pacific Islands, Asia, Americas and Europe routes were in-line with expectaitons laid down in February.

Operating expenditure increased by 9.2% to NZ$4.19 billion, pushing CASK up 4% - largely due to higher fuel prices.

Earnings before tax increased 2.5% to NZ$540 million, while net profit after tax increased 2% to NZ$390 million.

While welcoming the results, chief executive Christopher Luxon admitted that it has been a challenging period for the airline, which has had to deal with disruptions caused by issues with the Rolls-Royce Trent 1000 engines that power its fleet of Boeing 787-9s.

"While we are very proud of the financial achievements of the 2018 financial year, I want to acknowledge the patience and loyalty of our customers who have been impacted by operational disruptions while travelling with us this year,” he says. “These disruptions have resulted in a level of service for some that did not meet the high standards we set for ourselves.”

As a result, the carrier is leasing in two 777-200s and one 777-300ER to cover the downtime on its 787 fleet due to additional inspections required on the Trent 1000s.

In its outlook, the Star Alliance carrier says that it expects underlying pre-tax earnings to come in a range between NZ$425 million and NZ$525 million. That excludes an estimated impact of between NZ$30 million to NZ$40 million due to “schedule changes prompted by the global Rolls-Royce engine issues.”

Capacity growth across its network is expected to come in between 4% and 6% during fiscal 2019, with the bulk of that on domestic and transtasman routes. It has also announced plans to add flights to Chicago, Taipei and a second daily service Singapore commencing in April.

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