News
Air New Zealand predicts its profit ascendancy will end, Qantas injects fresh funds into Jetstar Pacific
May 6th 2016
Air New Zealand (Air NZ) this week said its consecutive profit growth of recent years is likely to end in 2017 as it faced increased competition and NZ$120 million ($85.6 million) in foreign exchange hedging losses. Read More » In a presentation to investors on last Tuesday, the carrier said it expected 2017 earnings to be “solid, while not at the level of 2016”. “We see further opportunity for growth, but recognise the environment will be different,” the airline said.
New Zealand has become a popular tourist destination that is attracting a large number of carriers to its shores, including American Airlines, United Airlines, Qatar Airways, Emirates Airline, AirAsia X, Philippine Airlines, Hainan Airlines, Air China, China Eastern Airlines and China Southern Airlines.
Air NZ intends to add 11% more capacity in the fiscal year ending June 30, with 64% of the increase placed onto new routes and 34% destined for existing routes. It has launched services to Singapore, Houston and Buenos Aires and plans to add Ho Chi Minh City, Manila, and, if insider reports are true, Chengdu to its network by year end. Air NZ said this week it would add a fourth weekly return service on its Vancouver-Auckland B777-200ER route between October 15 and December 3. In 2017, Air NZ plans to increase ASKs between 8%-10%.
The Star Alliance member has guided the market to earnings before taxation of more than NZ$800 million in FY2015/16. If realized, the result would be a significant improvement on the NZ$474 million posted for the previous year.
Across the Tasman, Qantas Airways and Vietnam Airlines have unveiled plans to invest an additional $139 million into joint venture Vietnamese low-cost carrier, Jetstar Pacific. Qantas, with a 30% stake, will provide $42 million to Jetstar Pacific in a number of tranches from now to 2020, with Vietnam Airlines responsible for the remainder. The funds will be invested in expansion of the Ho Chi Minh-based carrier’s fleet of 12 A320s to 30 by 2020. Jetstar Pacific is facing increased domestic competition from new kid on the block, VietJet Air. The LCC posted its first annual profit of $11,000 in 2015.
Australia’s Virgin Australia has posted a third quarter loss, but said it would maintain its forecast of pre-tax earnings of $23 million to $46 million for the year to June 30. In March, Virgin Australia announced it planned to tap its four largest shareholders for a $317.2 million loan, stoking fears about its progress to eventual profitability.
Air NZ last month said it is looking to sell all or a part of its 25.9% shareholding in the carrier. It was reported in Australian media this week that China’s Hainan Airlines and also China Southern Airlines were evaluating purchase of a holding in Virgin Australia.
