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BusinessDesk: Air NZ targets $110 mln profit uplift by 2015, sees improvement on last result

BusinessDesk: Air NZ targets $110 mln profit uplift by 2015, sees improvement on last result

By Paul McBeth

Air New Zealand, the national carrier, wants to lift annual profit by $110 million by 2015 and is picking a better performance than the latest earnings performance which was sapped by natural disasters in the region.

The Auckland-based airline is aiming to boost earnings from long-haul flights, an under-performing part of the business, according to investor presentation slides lodged with the stock exchange. The airline’s key planks would see it focus on in-flight products and services, deploy the new Boeing Dreamliner and cut costs. It also plans to explore new markets in South America, Asia and North America, as well deepen network into China.

The target comes after Air NZ reported a second-half loss of $37 million in the six months ended June 30, when the airline’s services were disrupted by earthquakes in Canterbury and Japan, leading to unprofitable ‘compassionate’ fares for Christchurch residents.

Chief executive Rob Fyfe described the period as the “most difficult Air New Zealand has faced in the past decade,” and came as airlines around the world struggled with tepid demand for long-haul travel amid the global economic downturn.

Still, Air NZ is more upbeat about the coming year, saying it expects improvement on the latest financial year, though that will be impacted by external conditions.

Last month, the airline said it will add up to two million passenger seats a year to regional New Zealand destinations, spending US$270 million on as many as a dozen new ATR-600 turbo-prop planes.

Air NZ’s dominance in the local market, with about 80 percent of market share, underpins its Ba1 credit rating with Moody’s Investors Service, and the implied support from government ownership lifts that to an investment grade Baa3 rating. That rating was put on a negative outlook in March as the natural disasters in the region and rising fuel costs create uncertainty for the airline’s earnings.

The airline raised $150 million through an unsecured unsubordinated bond issue in September, paying annual interest of 6.9%. The bonds last traded at $100.487 per $100 bundle on the NZX’s debt market.

Air NZ’s shares were unchanged at 97.5 cents in trading today, the lowest level since July 22 2009, and have shed 32 percent this year.


See Air New Zealand's bond issuer profile page here

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