The Government had plenty to smile about yesterday, when Air
New Zealand reported a much improved operating profit of
$1.01 billion for the year ended June.
The operating profit was 13% ahead of the previous
corresponding period but more was to come.
The further down the balance sheet, the better the profits.
The before-tax profit rose 40% to $357 million from $255
million in the previous period and the reported profit rose
45% to $262 million from $181 million.
The board declared a tax-paid dividend of 5.5c per share,
bringing the total dividends declared for the year to 10cps,
a 25% increase.
A special dividend of 10cps was also declared.
The Government sold down some of its stake in the national
carrier last year, as part of its mixed ownership model, but
it still retains more than 50% of the company.
In 2002, the former Labour government bailed out Air NZ with
$885 million to give the Crown an 82% stake.
The programme was in two parts - a $300 million loan and a
$585 million investment.
The loan was by way of 1.25 billion convertible preference
shares at 24c each and the investment by 2.2 billion ordinary
shares at an issue price of 27cps.
A further 29.9 million convertible preference shares were
issued for interest on the loan.
The Government will receive $90.3 million in cash dividends
from Air NZ for the period under review.
However, since the company restarted paying dividends in
2005, the Government has received about $685 million in cash
When it sold down 20% of its stake last year, it received
$365 million to give an estimated return on its original
investment of about $1 billion.
The Government still owns half of the company which, at
yesterday's value, stood at $1.3 billion.
The Government also received a dividend of $34.6 million from
Genesis Energy, another of the companies it sold down.
Craigs Investment Partners broker Chris Timms said the strong
result was underpinned by revenue growth and falling costs.
Revenue of $4.66 billion was in line with estimates but was
not a big feature in the result, given operating statistics
were published monthly.
Operating cash flows were again strong at $730 million.
Air NZ had cash holdings of $1.23 billion, placing the
airline in a solid position as it continued to modernise the
''While no specific guidance was provided for 2015, Air NZ
expects to improve on 2014,'' he said.
Chairman Tony Carter said the result represented the third
consecutive year of strong earnings growth for the airline.
The airline would significantly expand its capacity in the
coming year as new aircraft arrived.
''Based on our current expectations of market demand and fuel
prices, we expect to improve on the 2014 result in the coming
year. This outlook excludes equity earnings from the Virgin
Chief executive Christopher Luxton said some of the plans the
company had for improving customer service included the
induction of the Boeing 787-9 fleet, the refurbishment of the
Boeing 777-200ER fleet, moving to new terminals and lounges
in Los Angeles and London and lounge upgrades across the
The alliance with Singapore Airlines was the third strategic
revenue sharing alliance formed by Air NZ in recent years,
following agreements with Virgin Australia and Cathay
''Strong alliances such as this provide us with a platform
for sustainable growth, allowing us to open up new routes and
markets across the Pacific Rim,'' he said.