A major turnaround in the hedging of the New Zealand
dollar helped Air New Zealand lift its operating profit by 28%
in the six months ending December.
The national carrier, in which the Government owns a majority
share, yesterday reported an operating profit of $464 million
for the period, up from the $363 million reported in the
previous corresponding period (pcp).
In its release to the NZX, the company made much of its
''normalised earnings'' before taxation rising more than 300%
to $139 million from $33 million in the pcp.
However, an analysis of the financial accounts showed that in
the current period, Air NZ made a gain of $3 million on its
foreign exchange compared with a $46 million loss in the pcp
- a turnaround of $49 million.
Also, the company booked more depreciation and amortisation
in the period at $203 million, from $171 million, helping the
reported profit rise to $100 million from $38 million in the
Air NZ made some improvement in its operating revenue,
increasing it to nearly $2.4 billion in the period from $2.3
billion in the pcp. And it also cut costs by $232 million in
But most of the company's interim improvement came straight
from the improvement in foreign exchange hedging.
The company increased its interim dividend by 50% to 3c per
share (cps) meaning the Government will receive $24.1 million
from its investment in Air NZ.
Craigs Investment Partners broker Chris Timms described the
result as ''sound'' and said Air NZ had made good progress.
''When they talk about the much improved profit, not all of
that is from operations. With hedging, they have to be doing
the right thing as it is such a big part of their business,''
Air NZ chairman John Palmer said the company had made
''excellent progress'' when put against the backdrop of a
sluggish economic recovery and ongoing challenges facing the
''This is the best interim profit result for five years. The
substantial change programme the airline has been
implementing has positioned the business for consistent
growth and sustainable profitability over the coming years.''
New chief executive Christopher Luxon said the airline had
experienced increased demand on its domestic routes, despite
a slower-than-expected economic recovery. It had been
pleasing to see regional New Zealand take up the airline's
commitment to more deals every day.
The Tasman and Pacific Islands remained a critical part of
the airline's network, he said. For the first time since the
financial crisis, the international long-haul part of the
network was profitable.
Mr Palmer said that based on the company's current forecast
of market demand and fuel prices at present levels, the
expectation that earnings before tax for the second half
would ''comfortably'' exceed the previous corresponding
• Operating revenue: $2.37 billion
expenses: $1.9 billion
• Foreign exchange
gain: $3 million
• Operating profit:
• Reported profit:
• Dividend: 3cps