23 Aug 2010

Drop in profit for Air NZ expected

6:03 am on 23 August 2010

Forsyth Barr analyst Rob Mercer expects Air New Zealand's profits to be hit by reduced capacity in the 2010 financial year.

Air New Zealand releases its full year results on Thursday and Forsyth Barr expects its profit will more than triple to $84 million.

But once losses from foreign exchange and fuel hedges are stripped out, head of research Rob Mercer says underlying profit will have slipped by almost 20% to $95 million.

And he thinks revenue will have fallen by 11% to $4.6 billion.

Mr Mercer says Air New Zealand effectively cut route capacity and available seats by 8% in 2010.

But he says that reduction in revenue has been offset by a substantial fall in fuel costs which are expected to be down by 43% - from $1.7 billion down to just under $1 billion.

Mr Mercer also says investors will be interested in the outlook statements.

Rulings are pending from the ACCC and the Ministry of Transport about an alliance with Virgin Blue.

New Boeing 777

Mr Mercer says the first fleet of the new Boeing 777-300 aircraft arrives in November.

He says there are ongoing developments across every division as Air New Zealand gears up for the Rugby World Cup in 2011.

Mr Mercer says 2012 should be a positive year as economic conditions are expected to improve and the pending developments should start contributing to revenue and profit improvement.