22 Feb 2018

Fuel costs burn through Air NZ profits

12:16 pm on 22 February 2018

Air New Zealand's profit has lost some altitude because of rising fuel costs.

Wellington Airport

NC Photo: RNZ / Rebekah Parsons-King

The airline's net profit for the six months ended December was $232 million compared with the previous year's $256 million.

It carried more than 8.5 million passengers during the period and its revenue rose by more than five percent to a record $2.7 billion, as it improved its share of the domestic and trans-Tasman markets.

However, it was hit by an 18 percent rise in its fuel costs as the global oil price rebounded from the multi-year lows, which sent its profit to record levels in 2016.

"This high quality interim performance was driven by robust passenger demand and revenue growth, reflecting the airline's strong position in New Zealand and throughout our Pacific Rim network," Air New Zealand chairperson Tony Carter said.

Passenger numbers in New Zealand, trans-Tasman and the Pacific were higher, while long haul services to North America and Asia were either flat or a touch weaker.

However, it has been helped by some routes by competitors, such as Emirates and some Chinese airlines, cutting back services.

Air NZ said it would start flying direct to Taiwan later in the year.

In addition to higher costs, the airline has also had to contend with engine problems for its Boeing-787 Dreamliner planes, which has seen several taken out of service for urgent maintenance, and forced it to lease two replacement planes.

"Looking to the remainder of the year, we are optimistic about the overall market dynamics. Based upon the current market conditions and despite the increased price of jet fuel, the Company is still expecting 2018 earnings before taxation to exceed the prior year," Mr Carter said.

The airline, which is half owned by the government, increased its dividend payout by a cent to 11 cents a share.

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