28 Feb 2019

Air NZ profit hit by rapid rise in fuel prices

9:52 am on 28 February 2019

Air New Zealand's half year profit has tumbled because of high fuel costs, slower passenger growth and problems with its Boeing 787-9 Dreamliner aircraft.

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Air New Zealand posted a half year net profit of $152m, down 34 percent on last year. Photo: 123RF

The airline has reported a net profit of $152 million down 34 percent on a year ago.

It was hit by a 28 percent rise in fuel costs, which together with the increased cost of doing business, more than offset the airline's revenue growth of 7.1 percent.

Passenger numbers rose four percent to 8.9 million, but Air New Zealand chief executive Christopher Luxon said the rate of growth had slowed.

"While we continue to expect solid growth across our key markets including domestic New Zealand, we cannot ignore signals that the rate of growth has slowed somewhat from prior years."

Earlier this week, Air New Zealand said it would cut prices on its lowest fares for 41 domestic flight routes by up to 50 percent in what it called the biggest shakeup in its pricing in a decade.

Today it confirmed it would provide an update on its review of its network, fleet and cost base by the end of March.

However, it said it would pull back its plans to grow its capacity across its domestic, Pacific and international routes, including reducing flights to LA and San Francisco, with revenue growing at a slower rate.

The company confirmed the full year underlying earnings between $340-400 million, down as much as 40 percent on a year ago.

In January it warned forward bookings were slowing, fuel prices were high, and it had costs of up to $40m because of the problems with the Rolls-Royce engines used on its Boeing 787 Dreamliner planes.