Air New Zealand today announced a profit of $220.3 million before unusuals and tax for the year ended June 30, 2003, up $187.3 million (567 percent) on the previous financial year.
The Net Profit After Tax was $165.7 million for the 2003 financial year.
Group earnings before interest and taxation were $233.4 million, up 162 percent on the previous year.
Chief Executive Officer and Managing Director Ralph Norris said the result was underpinned by the success of the airline’s domestic business and an improvement in the international business.
“Profits were also assisted by the strengthening of the New Zealand dollar against the United States dollar. As approximately 45 percent of our costs are United States dollar denominated, the rising exchange rate reduces costs in New Zealand dollar terms.Ê Partially offsetting this effect is the reduction in the New Zealand dollar value of fares sold in foreign currencies,” he said.
There was strong improvement in Operating Cash Flow, up from $56.2 million last year to $523.1 million this year - a $466.9 million turn around.Ê Gearing continued to fall, closing the year at 65.3 percent, and further reductions remain a financial priority. This combined with continuing strong capital demands from within the business has led the directors to decide not to declare a dividend for the 2003 year.
Mr Norris said the airline’s staff played a critical role in ensuring the airline achieved a good result.
“The challenges of the global aviation industry place special demands on our employees. Across the business they have worked extremely hard to lift performance and customer satisfaction levels during extremely challenging times.”
Mr Norris said that the 2003 financial year has provided salutary examples of the difficult nature of the airline industry.Ê
“The year began well for Air New Zealand as traffic recovered from the aftermath of the September 2001 terrorist attacks.Ê The launch of Express Class on the domestic network in November last year successfully moved the profitability of our domestic business to a much more sustainable basis.Ê Lower fares resulted in more people flying to more places, more often.
“However, by the beginning of the second half of the financial year, the industry again faced massive problems.Ê With the threat, and subsequent reality, of war in Iraq, and the outbreak of SARS, many passengers again chose to delay or cancel travel plans.Ê Load factors quickly fell below break-even levels on some flights to Asia, and this resulted in losses.
“We do not know where the next shocks to the industry will come from, but we can be sure that they will continue coming.Ê The only effective response to this environment is to understand our markets and customers very well, and to match our network, products and cost structure to them.Ê With customers and markets changing rapidly, we must ensure that our business can keep up.”
Air New Zealand Chairman John Palmer said the proposed alliance with Qantas would strengthen Air New Zealand’s ability to survive the challenges of the aviation industry.Ê
“Rather than exhausting our limited financial and human resources in a grinding war of attrition with Qantas, we have proposed the creation of a strong regional alliance that will enable us jointly to face the challenges confronting the industry.Ê This is a bold and innovative proposal and I fully endorse the firm view of the Board and management that this alliance is the only realistic way for Air New Zealand to provide for a sustainable and independent future.”
Mr Palmer said Air New Zealand could not afford to stand still.Ê
“There are numerous recent examples of airlines that have been profitable one year and bankrupt shortly thereafter. While pleased with our progress, it should be noted that the company is still not achieving its cost of capital. We must address the fundamental problems of over-capacity and cost structure and it is for this reason that we believe that the alliance with Qantas provides the best future for Air New Zealand.
“Despite the difficulties of the industry, we remain optimistic that, with regulatory approval of the alliance with Qantas, Air New Zealand will have the ability to make the changes required to survive and prosper.Ê We are determined to continually transform and simplify our business to remain ahead of industry change.”
Mr Palmer said rebuilding Air New Zealand continues to be a demanding and exciting challenge.Ê Ê“We will not back away from the difficult decisions - we must keep moving forward and confronting the barriers to increase shareholder value.”