Air New Zealand aircraft at Dunedin International Airport
earlier this year. Photo from ODT files.
Earthquakes, rising fuel costs and declining demand for
international flights are all expected to contribute to an
estimated 17%-36% decline in after-tax profit for the national
carrier, Air New Zealand.
Dividends are expected to reflect the tough trading year,
falling from 7c per share a year ago to an estimated 4c for
the present full year.
Air New Zealand, which is scheduled to report its full-year
result on August 25, faces a financial year of two halves,
according to Craigs Investment Partners broker Peter
Operating statistics released in May supported Air New
Zealand's own expectation for an unprofitable second half
during 2011, because of earthquakes and rising fuel trends,
Mr McIntyre said.
"The year-to-date passenger numbers remain robust at 4.5%,
but May's passenger numbers declined 3.9%, reflecting a 13.3%
collapse on Asian routes," Mr McIntyre said.
Air New Zealand's revenue is forecast by Craigs to be boosted
almost 10% to $4.45 billion, but earnings before interest,
tax, depreciation and amortisation are forecast to decline
4.5% to $425 million, while after-tax profit falls 17% from
$82 million a year ago, to $68 million.
Mr McIntyre expected some rebound to profitability for the
second half as pressure on currency and fuel hedging eases,
and from the positive effect of the Rugby World Cup and
Virgin airlines' transtasman alliance.
While highlighting the decline in long-haul flight, Mr
McIntyre said the domestic flight numbers were showing some
"More domestic flights are a positive sign for the economy in
general," Mr McIntyre said.
Forsyth Barr broker Peter Young said Air New Zealand's
short-term earnings had "taken a hit", not only from higher
fuel costs but the knock-on negative effects of the
Christchurch and Japanese earthquakes.
Forsyth Barr was estimating an after-tax profit decline of
36%, from last year's $82 million to $51.9 million, but
because the risks were already factored into the share price,
it offered good value to buyers, he said.
He maintained a "favourable" medium-term earnings outlook,
with Air New Zealand being able to raise yields from ticket
costs to offset fuel costs, Rugby World Cup benefits,
capacity expansion when new aircraft arrive and also the