25 Feb 2013

Strong half year result tipped for Air NZ

7:06 am on 25 February 2013

Analysts are tipping Air New Zealand will have a strong half year result following turbulent times for the industry in the past few years.

The airline's profit fell last year due to record high fuel prices and flat customer demand for long haul flights.

But at its full-year Air New Zealand was forecasting it would more than double its pre-tax normalised profit of $91 million.

Forsyth Barr head of research Rob Mercer said the airline is poised to deliver a substantial uplift in earnings and predicts a $98 million profit, which is up just over 150%.

He said that's being compared to a relatively low number.

Mr Mercer said there's been a difficult trading environment for airlines over the last few years.

But he said over the last six months there will be productivity improvements because Air New Zealand has brought in the Boeing 777-300 aircraft to replace the older 747 aircraft, as well as implementing a number of cost initiatives across its business.

"Those productivity improvements with a stable fuel price and some modest improvements in yields should see earnings recover nicely in the interim and even into the full year result."

Mr Mercer said the profit improvement is being driven by the better productivity.

He said the new 777-300 aircraft are more fuel efficient and the annual maintenance costs will be lower.

Mr Mercer said there should also be savings in labour costs because Air New Zealand has consolidated its operations in Japan and China by focusing on single destinations rather than multiple destinations.

Air New Zealand's results are out on Thursday.