27 Apr 2013

Air NZ profitability improves

6:22 pm on 27 April 2013

Analysts say Air New Zealand's profit upgrade is due to the increased profitabliity of its international business and the withdrawal of a loss-making service.

Based on current market conditions, Air New Zealand expects normalised annual earnings before tax of between $235 million and $260 million.

The projection - much higher than it previous guidance - compares with the $91 million in pre-tax normalised earnings for the year ended June 2012.

Macquarie Equities says the strong earnings are clearly driven by the higher profitability of Air New Zealand's international business as well as strong increases in loads across its network.

Forsyth Barr analyst Rob Mercer says the single biggest contributor to the improvement was the airline's withdrawal of its loss-making Hong Kong to London service.

Air New Zealand chief executive Christopher Luxon says the company worked hard to overhaul the international business and has focussed on growth while keeping costs under control.

He says Air New Zealand is well positioned to access growth in Asia, the Americas and Australia.

"We've put a lot of emphasis in our sales and marketing teams offshore, getting closer to the customer, getting closer to the trade partners that we work with, in order to realise more opportunity."