Regional Round-Up
Air NZ announces record profit as Qantas forecasts lift off
September 1st 2014
Air New Zealand (AirNZ) reported the best annual profit result in its history, at NZ$262 million (US$218 million), a 45% increase over the previous year. AirNZ CEO, Christopher Luxon, said the profit would help fund the NZ$2.2 billion the carrier is spending on a fleet upgrade and NZ$40 million on lounge facilities in Australia and New Zealand. Read More » The aircraft upgrade represented an unprecedented level of investment for the airline, but the incredibly strong operating cash flow made the investment “quite digestible”, Luxon said.
Alan Joyce chose to call the A$2.8 billion (US$2.6 billion) annual loss his Qantas Group incurred as “confronting”. However, he said that the worst of times had past. Qantas’ loss, more than double analysts’ forecasts, came with the surprise $2.6 million write down on the value of the fleet at its international arm. With that number out of the way and operational results that were not as bad as expected, Joyce forecast a rapid improvement in profitability this year as capacity on its domestic and international routes is reduced. Budget subsidiary, Jetstar, lost $116 million, which almost completely eroded the profit of Qantas’ domestic arm. Its profit dived from $365 million last year to $30 million for the 12 months to June 30. Pre-tax losses at Qantas International doubled to $497 million, despite cost savings of almost 5%. Capacity grew by 9.5%, which exceeded demand and as fuel cost hit a record high.
Analysts believe the fleet write down and subsequent financial realignment by Qantas is intended to attract a foreign investor. The flag carrier has created a new corporate entity for its loss-making international arm following the recent government amendment of the restrictive Qantas Sale Act. Qantas is facing intense competition from deep pocketed offshore carriers and local rival, Virgin Australia.
