19 Jul 2012

Air New Zealand confident about coming year

9:35 pm on 19 July 2012

Air New Zealand says it's confident about the coming year, due to some of the pressures on the industry having abated slightly.

In February, the national air carrier said achieving last year's $82 million profit would be challenging, given uncertain trading conditions.

It won't report its June financial year profit until later next month, which should reflect high prices, the global slowdown and intense competition.

But Air New Zealand chairman John Palmer says its successful strategy to build up patronage between Los Angeles and London, and recent falls in fuel prices, have so far eased its burden for the current year.

"That's a reflection of intense effort by the company to both position itself competitively in areas where we think we can grow, to pay very close attention to our cost base, and helped by the hedge position that we've had in what has been a rising exchange rate now being neutral and the fuel position looking a little more positive for us in the coming years."

Air New Zealand chief executive Rob Fyfe says investing in its domestic and short haul businesses is proving more profitable than its long haul assets.

He says proportionately more of Air New Zealand's future investments are going into regional assets than long haul assets.

He says Air New Zealand has been growing its domestic market and its position in the Australian market through its investment in Virgin.

Mr Fyfe says Air New Zealand has a far greater ability to compete in those markets because it has greater control of the costs going into the short haul business than the long haul business.

"An aircraft flying to London and back, a 777-300, it costs $1.25 million to get that aircraft to London and back and over 50% of the cost of fuel, a 737 flying to Auckland - Wellington about 23% of the cost is fuel".

Mr Fyfe says Air New Zealand is weighting its business to the regional market and its strategies will increasingly be oriented towards growing the domestic market.