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Air New Zealand returned to profit after three years of losses and will pay a special dividend as it benefits from strong demand for travel following the Covid-19 pandemic.
The national carrier posted a profit of $412 million in the year to June 30, a turnaround from a loss of $591m the previous year. Revenue jumped 135% to $6.45 billion.
The news came on the same day Australia’s national carrier, Qantas, reported it had also returned to profit after three years of losses, turning to an annual profit of A$2.47b (NZ$2.7b) from a A$1.9b loss the previous year. The Australian airline said it would buy back up to A$500m of shares but would not pay a dividend, AAP reported.
Airlines were hard hit during the pandemic when international borders were closed to travellers, and Air New Zealand needed the Government’s help to keep it afloat. However, a surge in travel demand when borders re-opened and a lack of airline capacity has seen the national carrier roar back to profitability and enabled it to resume dividend payments.
“After several volatile years it’s great to be back in the black and standing on our own two feet especially given we have more than $3.5b in aircraft investment coming over the next five years,” said chief executive Greg Foran.
The airline announced an order for two new ATR turboprop aircraft for regional routes, as well as two new Airbus A321neos for its international short-haul network. That’s on top of its existing domestic Airbus A321neo orders, eight new Boeing 787-9 Dreamliners to replace its Boeing 777-300ERs, and an interior retrofit of 14 existing Boeing 787-9 aircraft.
The financial year began as borders were still reopening and aircraft were stored in the desert, and ended with domestic capacity at 94% of pre-Covid levels and international capacity at 71%. Having restored its international network, the airline carried out the biggest recruitment drive in its history and returned all aircraft to the skies.
Air New Zealand aircraft and crew will be returning to its Auckland-Perth route on October 29 after a period of operation in partnership with Spanish airline Wamos Air. The airline will continue operating daily services to Perth, with more than 2000 seats a week available.
A Boeing 787 that was damaged in a collision with an airport service truck in August at Auckland International Airport would be out of service till about the end of October, Foran said.
Jonathan Killick/Stuff
Air New Zealand chief executive Greg Foran says after several volatile years for the airline, it’s great to be back in the black and standing on its own two feet.
The business has benefited from robust demand for travel and constrained supply coming out of the pandemic, and it plans to pay full-time staff a bonus of nearly $2000.
The company reported profit before tax and one-time items of $585m, the second-highest profit in its history, in line with its June forecast for at least $580m and a turnaround from a pre-tax loss of $725m last year.
“We know increased costs and high demand have made flying more expensive,” Foran said.
“In the past year we put more aircraft and seats in the air, so there are more choices for customers which helps alleviate the cost of flying. At the same time, our own costs continue to rise, and the reality is that airfares are unlikely to return to pre-pandemic levels.”
Foran said fares had increased between 30% and 35% on average.
Fares to North America were likely to ease as competitors started seasonal services from November, increasing the number seats by 40%, the equivalent of about an extra 10,000 seats a week, he said.
“So I would expect that some of that pricing to ease.”
He said the airline was mindful of the uncertain economic environment and that a number of factors may impact future customer demand and profitability.
That included increased international competition, volatile fuel prices, a weaker New Zealand dollar, ongoing wage inflation and increased airport charges.
Given the uncertainty and volatility of some of these macroeconomic factors, the airline did not provide guidance for future earnings.
The company is returning about $200m to shareholders through the payment of a 6 cent special dividend, having not paid a dividend since 2019, prior to the pandemic.
From this financial year, the company plans to pay out between 40% to 70% of its underlying net profit after tax in dividends.
Air New Zealand shares gained 3.3% to 79c in midday trading on the NZX and it was the most traded stock on the market.
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