From sub-basement level to soaring over the rooftops, our national airline has spectacularly resurrected its fortunes over the past year after the travails of the pandemic, turning in its second highest ever profit.
Air New Zealand (AIR) has reported pre-tax earnings of $574 million and after-tax profits of $412 million for the June 2023 year, turning around from a pre-tax loss of $810 million and after-tax loss of $591 million a year ago at the tail end of the pandemic.
The performance for the airline this year is second only to that turned in during the 2016 financial year, when it reported pre-tax earnings of $701 million and an after-tax profit of $490 million.
In 2019 before the onset of Covid, Air New Zealand reported pre-tax earnings of $382 million and after-tax earnings of $276 million.
And there is something in the latest result for the shareholders, among which we, the taxpayers are - courtesy of the government - 51% owners of Air New Zealand. At the time the airline had its $1.2 billion recapitalisation last year Air New Zealand said it wouldn't look at paying dividends before 2026. But such has been the turnaround this year that it is paying out $200 million, styled as a 'special dividend', which equates to 6c per share.
From the 2024 financial year onwards the airline plans to pay out between 40% and 70% of its after-tax profits as dividends.
The profitability this year for Air New Zealand came despite a 31% rise in fuel costs, which contributed to a $1.5 billion fuel bill - the largest single cost for the airline.
But with capacity still relatively limited compared with before the pandemic, the airline was able to spectacularly increase its yields.
The key operating statistic of passenger revenue per available seat kilometre was some 45% higher than the last pre-pandemic year of 2019. Such yields are expected to drop as increased global flying capacity kicks in with airlines all gradually gearing up again after the pandemic disruptions.
In its statement to the NZX, Air NZ said it notes that the 2023 financial year was particularly unique with significant customer demand, constrained market capacity and lower fuel prices in the second half, "and as such, we believe the 2024 financial year will be more reflective of future financial performance".
"Looking ahead to the first half of the 2024 financial year, customer demand remains strong across our markets. We are mindful of the uncertain economic environment however and acknowledge a number of factors that may impact future customer demand and profitability. These factors include 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 will not be providing guidance at this time."
Air NZ's chief executive Greg Foran said a strong Air New Zealand "is good for New Zealand".
"We have rehired and trained in a tight labour market, lifted the starting wage for the airport teams to $30 an hour and improved the way we work with digital systems on the ground and in the air.
"Restoring services to 500 flights a day is not only good for Kiwis who’ve been able to take that long planned holiday, but it has also brought tourist dollars back to the regions and supports exporters who rely on regular air freight.
"We know increased costs and high demand have made flying more expensive. 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.
"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 $3.5 billion in aircraft investment coming over the next five years."
On Thursday the airline also announced an order for two new ATR turboprop aircraft for regional routes, as well as two new Airbus A321neos for the international short-haul network. That’s in addition to the existing domestic Airbus A321neo orders, and the eight new Boeing 787 Dreamliners coming into the fleet as the airline retires its Boeing 777-300s over time.
“We’re making progress on the things that matter to customers. Contact centre wait times have, on average, reduced by 75% since December, we’ve introduced an enhanced app, and we’ve had a step change in on time performance and more importantly, a reduction in cancellations. This June we were one of the best airlines in the Asia Pacific region at arriving on time, so we have momentum," Foran said.
55 Comments
Pretty much this. I mean nice for the shareholders and all that, but as somebody who has to fly for work more than I would like all I've noticed is:
- Absurdly high pricing, particularly for regional flights (managed to get Emirates business class flights to Sydney return for less than Air NZ wanted for one trip)
- Worsening service and schedule
- Increasing "stinginess" with on-board food and drink
- More cancellations and delays than ever
I guess the flying public only has itself to blame, with people so desperate to get back in the air after Covid (am I the only person not over-wintering in Europe right now?).
Interestingly enough, I'm starting to see some fairly sharp pricing during sales/promotions from Air NZ - maybe forward bookings are looking a bit shabbier than expected as households tighten the belt?
Its interesting isn't it, beggars can't be choosers is the take away.
1st world problem story...I was looking to spend a week overseas with my family, I literally laughed out loud at the Air NZ pricing...the cost would have been more than a brand new small car... so I went with Qantas for 50% discount (and one more hop). 8 hours of knees jammed in place, IFE being a survivor of the 90's and cabin staff who would give AA a run for the oldest and most feeble award.
As the banks and our grocery cartels can attest, its good to control the market.
Business class on Air NZ fills up before anything else, Im not sure what that is saying, particularly since the pricing is in nose bleed territory. It is ruining my chances of upgrades, which is disappointing.
The big slow is coming, credits from covid held by anz are drying up, prices will head south in a hurry I think. Im with you on the europe thing, so many people enjoying the crowded tourist spots right now.
Yes, that's because in the most recent decade, all airlines have crammed more rows into economy such that it is intolerable (let alone medically risky) for many to travel that class. With the cramped conditions being a known factor in DVT - I'm surprised international health and safety regulations allow the long-haul flights to have these increased the number of rows. Okay if you happen to get on a half-filled flight - but if you do 12-14 hours in a full capacity economy class - very bad/dangerous for older people in particular.
Im with you on the europe thing, so many people enjoying the crowded tourist spots right now.
100% I’ve got 6 or so weeks in SE Asia for some heat, a new wardrobe (who buys clothing in NZ when you can get 1/10 the cost overseas) and finally some well priced healthy food for a change. It is nice to see that overseas the news isn’t all doomsday predictions as in NZ.
dont we own most of AirNZ (govt)?
didnt we bail them out?
And they simply use the monopoly and help we give them to overcharge, offer a crap customer service and pay themselves huge bonuses.
The roi on the investment by the government is then wasted on stupid labour projects (see poll results for the publics opinion)
I suspect they are also running on high costs (bloated), contributing to inflation and generally run really badly and simply surviving because they are the only choice.
And then they have the cheek to publicise huge profits as if its in any way a great result for the customers or shareholders (us)
I'm too young to remember this, but wasn't the domestic part of Air NZ something different in the past to the international airline?
Maybe we need that model back, or at least for regional routes that aren't served by Jetstar as well.
Either that or offer some carrots for the likes of Sounds Air to expand their routes/fleets on regional services to give more competition.
The problem seems to be in part that Air NZ can use its regional monopoly (I paid $1250 to fly from Chc to Gisborne recently ... more than I paid for an upcoming trip to Aus) to sustain its increasingly crap international network/service.
Bring back New Zealand National Airways Corporation
You’ll find (have a source who worked at airNZ at the time) that the information sharing agreement that was put in place between AirNZ and Quantas, who own Jetstar, meant that they could see each others info and hence had no further reason to compete. Shortly after this the Nelson to Wellington route went up in price then was axed completely. Sickening practice really
I would agree - since covid service is crap, customer service lines are almost un-useable (unless you have hours to wait).
Its a givernment owned monopoly.
They should have service targets for customer service, running services that meet the needs of their customer (and shareholders - us) and keeping costs low to improve productivity and results for NZ businesses who use their service.
Sorry - their profit is in no way a key KPI... their customer satisfaction is.
Please read here, thanks
Unfortunately you can’t read too much into these sites. They are just for those that want to whinge. Same story for Qantas (see below) hating on your national airline seems standard procedure.
They dont give a stuff about reviews or customer service. if a customer wants to fly from A to B in NZ 9 times from 10 they have to use Air NZ... so they take as much money as possible and focus on profit and their bonus (at taxpayers expense).
We should give them fixed fare targets to meet for routes (force focus on productivty and keeping fares affordable for business, tourists and citizens, a big kpi for customer service (would customer recommend them) and break even target for profitability. In return they keep their jobs and we (their largest shareholder) get value. We could publish them every 6 months to the media and see how they do.
My Wife is a travel broker. She was telling me that she has to manage the credits, Air NZ has no idea of what it owes the individual. They have such a crappy outdated system, basically it is excel driven (this is from an IT friend who worked for them for a while), it hasnt changed since the 80's.
Not to mention they pay zero commission to agents now
That was a very infamous trick of Air NZ to retain the money, earn interest on it, and not share it with the customers and on top of that charge more. No wonder they have made huge profits. There should have been a class action suit by the customers to get the refund in cash immediately. The Government as a major shareholder should have ensured a fair play by Air NZ then.
Qantas have just been served with a class action in Oz for the same practices
Qantas faces class action lawsuit for not refunding tickets for COVID cancelled flights - ABC News
Gee, interesting comments! I'm firmly in the camp that when AirNZ is doing well - the country as a whole is too. Agree that internal travel seems expensive but there are alternatives if you're not in a hurry. Just booked an Intercity bus from Picton to Q'town with an overnight in Chch. Flying back from Q'town to Welly. As we're traveling with younger grandchildren, I did want to reserve seats together on booking - and found that cost me an extra $20.00 per seat. Thought that a bit miserable as in the main it's people with children that will be paying that price to reserve seats early.
Regardless, I never fly with any other airline :-). Whatever my purchase, good for the country is always my first consideration.
Their reputation is defintely (and IMO deservedly) taking a hit.
The biggest single issue is their exception from the CGA. Kiwis flying with their National (and govt owned) airline are the only ones not entitled to a refund. Credits only, and not for the service purchased, but for the $ spent. So often when rebooking you are stung for even more. Not to mention when they struggle, as a taxpayer we bail them out. So it is double dipping.
If you live in the regions, you then get even more Inflated pricing and worse service.
Our international family are also shying away from them now when visiting, mainly due to it "Pricing like a premium airline, but acting like a budget airline".
Great. We really need to sell TVNZ while we can still get something for it. What exactly does a country need an airline for anyway? Plenty of private players out there and plenty of countries cope without a flag carrier.
Hospitals need a complete overhaul as well. We should move to the Singapore model and reward people for being healthy - and let people choose if they want to go private or public. What is the point of having an expensive free system if it is crap?
Why would you queue up if there was a never fail, taxpayer sucker funded airline eating your lunch?
Lots of people can't afford to choose private healthcare in NZ, but I think you know that. There is a better way.
"Singapore’s healthcare system ranks among the best in the world in terms of various commonly used criteria such as infant and maternal mortality rates, life expectancy, and disability adjusted years, prompting Business Week magazine to rank it as the healthiest country on the planet. What is even more remarkable is that the fine outcomes are accomplished at less than half the costs in comparable countries"
Quote :
Qantas,
Around A$340m ($368.8m) has been set aside in bonuses for more than 21,000 Qantas employees, including pilots, cabin crew, engineers and head office staff. This was originally flagged in September 2021 in response to the challenges and hardships employees faced in dealing with the Covid crisis and to incentivise the turnaround.
These bonuses include up to 1,000 Qantas shares (valued at around A$6000 or $6510) that will now vest, and an A$5000 ($5424) “recovery boost” that eligible employees are receiving as enterprise agreements are finalised - a total of around A$11,000 ($11,934) each.
Unquote :
Any lesson here for Air NZ ?
All paid for by the taxpayer.
And
Qantas posts $1.74 billion profit, first full year in the black since COVID-19
https://www.9news.com.au/national/qantas-posts-first-full-year-profit-s…
Air NZ is very very top heavy. The wage expense goes mostly to the office workers. Having worked front lines for them, they pay the bare minimum possible with many of my flight attendant colleagues needing to contact payroll to be topped up so they were getting minimum wage for the hours worked.
Sad but true. Nothing like working at below minimum wage, wearing a corporate uniform and watching the company make record profits.
You are the country’s only airline and post COVID everyone is gagging to travel so you charge ludicrous prices that punters are climbing over each other to pay, and if it all goes pear shaped the Govt will bail you out no questions asked. Not exactly the success story of the century. May as well be celebrating the success of our mega supermarket chains.
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