The difference between a nimble Air New Zealand and a
behemoth Qantas Airways was revealed yesterday when the
Australian airline revealed a statutory after-tax loss of
$A2.8 billion for the year ended June.
The statutory loss was being reported in Australia as the
airline's largest after Qantas took a $A2.6 billion ($NZ2.9
billion) write-down due to a company restructuring which
included revaluing its fleet.
An underlying profit before tax loss of $A646 million ($NZ721
million) was a major reversal from the slim $A186 million
profit reported in the previous corresponding period. Revenue
fell 3.2% to $13.2 billion.
The company said there was a deterioration in the 2014
earnings from sustained revenue pressure and record fuel
In contrast, Air NZ reported a vastly improved profit at all
levels on Wednesday with the reported profit, or after-tax
profit, rising 45% to $22 million.
Craigs Investment Partners broker Peter McIntyre said the
market had reacted well to the Qantas result, with investors
understanding progress had been made during the year. Qantas'
operating cash flow in the period was $A1 billion and strong
debt reduction was under way.
There was a clear strategy in place to drive earnings
recovery, deleverage the balance sheet and build long-term
The accelerated $A2 billion Qantas transformation programme
was set to gain momentum in 2015 and a return to a before-tax
profit was expected in the current financial year, he said.
However, one of the main problems for Qantas was getting
external investment into the company. Ownership of Qantas
must be 51% Australian. All of its long-haul routes had
''Air New Zealand has been far more nimble than Qantas. It is
a smaller airline, but Air NZ is very good operationally,
making money off its domestic routes.''
Air NZ had also built up strategic alliances enabling it to
operate long-haul routes without the infrastructure. That had
allowed the airline to cancel some routes.
Air NZ had moved into the top tier of airlines while Qantas
had struggled, Mr McIntyre said.
For Air NZ, domestic routes were the ''bread and butter'' and
comparing New Zealand's national carrier with Qantas was very
Qantas' domestic earnings before interest and tax fell to
$A30 million in the period, down from $A365 million in 2013.
Qantas chief executive Alan Joyce said the domestic operation
suffered from demand below market capacity growth, continued
pricing pressure, the resources and government sectors being
weaker and unfavourable fuel costs.
The international division extended its losses to $A497
million from a loss of $A246 million as its revenue was
affected by competitor capacity. The division also suffered
from unfavourable fuel prices and foreign exchange
Mr McIntyre said Qantas shares had fallen from a high of
$A6.06 in October 2007 to a low of A95c in December last
year, giving a market capitalisation of about $A3 billion. At
its peak, the market capitalisation was more than five times
Air NZ had not suffered from government ownership. Having a
secure holding with the Government gave the company market
The Government received dividends from the company but also
had a say, allowing Prime Minister John Key to comment this
week on price-gouging on New Zealand regional routes, Mr
Jetstar, the discount division of Qantas, lost ground in New
Zealand while claiming better yields on key routes.
The discount airline had 20.7% of New Zealand's domestic
market at June 30, down from 22.4% a year earlier, Qantas
said in its market report.
Passenger numbers dropped 7.7% to 1.72 million and revenue
passenger kilometres fell 6.2% to 1.13 million. Capacity
shrank 4.5% to 1.42 million available seat kilometres.
Qantas did not break out any financial figures for the
domestic New Zealand service which is part of the wider
Jetstar segment. Mr Joyce said the airline had gone through
the worst as it overhauled its business and anticipated rapid
improvement in the group's financial performance in 2015.
The airline saw substantial value in the Jetstar airlines
which would be realised over time, particularly from Asian
Qantas split its international and domestic businesses into
separate segments which Mr Joyce said created potential for
future investment in the international business.
''It will create the long-term option for Qantas
International to participate in partnership opportunities in
the international aviation market with a view to achieving
further efficiencies and improved returns to shareholders,''