Air New Zealand profit slumps on higher fuel prices

Aug 26, 2008, 0:13 GMT

Wellington - Air New Zealand on Tuesday reported a 24-per- cent slump in profit for the last fiscal year because of soaring jet fuel prices.

The airline, which is 77-per-cent owned by the government, announced a pre-tax profit of 197 million New Zealand dollars (about 138 million US dollars) for the year ended June 30.

Chairman John Palmer said that the cost of fuel had risen by 300 million New Zealand dollars in the year, resulting in profit declining 24 per cent on 2006-07, despite increases in fares.

'The current challenges facing airlines are immense, but the board is confident that Air New Zealand is in a good position to create and seize opportunities in both the domestic and international businesses,' he said.

Palmer said that 2009 looked set to bring more changes as the industry adapted to live with higher jet fuel costs, and it was difficult to accurately forecast next year's financial results.

'Based on the existing hedging policy and network plan, in the current market conditions Air New Zealand expects to operate profitably if the average price of jet fuel is below 140 US dollars a barrel for the 2009 financial year,' he said.

The national airline carried 13.2 million passengers, 5.6 per cent more than in the previous year, and lifted operating revenue by 9.1 per cent to 4.7 billion New Zealand dollars by adding capacity on both domestic and international services.

Air New Zealand faced additional competition on domestic routes during the year, when Pacific Blue, a subsidiary of British tycoon Richard Branson's Virgin group, began services.

Both compete with Australia's Qantas Airways on the main trunk route linking Auckland, Wellington and Christchurch and on services across the Tasman Sea to Australia.

Air New Zealand declared a dividend of 3.5 New Zealand cents a share, bringing the year's total dividend to 8.5 cents.