27 Aug 2012

Air NZ results due on Thursday

6:55 am on 27 August 2012

Record high fuel prices and flat customer demand for long haul flights are expected to impact Air New Zealand's full year results, due out on Thursday.

The company was plagued by the problems in the first half of the year, with its profit falling by more than 60%.

The airline made $38 million in the final six months of 2011, compared with $98 million a year earlier.

But Forsyth Barr equity analyst Rob Mercer is picking Air New Zealand will still make a profit of $63 million, saying there has been some improvement in the second half.

He said Air New Zealand has been flexible and nimble with flight paths and deals, and it's had very good fleet management and forward planning which has kept them profitable in the current climate.

Mr Mercer said the company has had to manage fuel prices and a slow and difficult economic climate.

But he said improvements in the June quarter included fuel prices easing, the domestic landscape changing with competition between Jetstar and Virgin and on the Tasman route Air New Zealand's alliance with Virgin.

Mr Mercer said Air New Zealand has reduced the number of the less efficient Boeing 747s in its fleet which will help operating costs.

He said the global industry has had a very difficult year in 2012 and Air New Zealand will be one of the few companies to come through with a profit.

No quick fix

Mr Mercer said there is no quick fix in terms of demand, but Air New Zealand has been reducing its routes, as well as improving the efficiency of its fleet by replacing the 747 with the 777-300, which is 15 - 20% more fuel efficient than the 747.

He said there is a relatively new fleet of A320s on the Auckland, Wellington and Christchurch routes, so there are efficiencies through that, as well as getting having an alliance with Virgin on the Tasman routes.

Mr Mercer expects it will still be some time before there is any major improvement in demand on the long-haul routes from Europe, Britain and the United States.