17 October 2008

Emirates' Tasman profit climbs 50%

Reports from New Zealand say that Emirates has increased its profits on the Tasman by more than 50 per cent to $26.2 million, according to accounts just filed with the Companies Office.

The Dubai-based airline flies to Auckland and Christchurch as an add-on to its long-haul services to several eastern Australian cities.

The numbers are for the year to March 31, and do not include the subsequent sharp rise in fuel costs that king-hit Air New Zealand results for the year to June 30.

Emirates' revenue of $208.1 million was up from $173.1 million. Total operating costs were $181.9 million, up from $156.1 million, and the airline paid no tax.

Emirates' New Zealand manager, Chris Lethbridge, said its financial performance locally was in line with the airline's planned growth path.

"Our focus in New Zealand from day one has been to grow the market, and the success of that approach is being reflected in our results."

Forsyth Barr head of research Rob Mercer said while Emirates was making adequate money on the competitive route, that would almost certainly have been wiped out by fuel hitting US$182 (NZ$277) a barrel in the middle of the year.

This month jet fuel has fallen back below US$100 a barrel.

Mr Mercer cautioned whether the basic set of accounts filed in New Zealand fairly reflected the total running costs of Emirates' trans-Tasman business.

It is more cost-effective for Emirates to fly its large planes to New Zealand and back, due to the expense of having them sit idle in Australia for 10 hours before their return journey to the Middle East.

The record cost of fuel, reduced demand and increased competition had put the marginally profitable route under pressure.

"Trans-Tasman is back in the spotlight as being under pressure both in terms of yield and profitability," Mr Mercer said.

Air New Zealand has said the Tasman route would quickly return to losses if an expected 10 per cent extra capacity was added in the next six months or so.

Emirates plans to start flying the Airbus A380 super jet to Auckland from February.

Budget airlines Jetstar and Pacific Blue are also expanding out of Auckland, offering cheap launch fares and putting further pressure on their competitors' profits.

But there was a price to pay for travelling on airlines that offered less frequent services than Air New Zealand or Qantas, Mr Mercer said.

A return flight on Jetstar to the Gold Coast from Auckland might be cheaper than Air New Zealand, but could mean paying for an extra night's accommodation because flights arrived in the evening, while Air New Zealand offered morning arrivals.

A Report by The Mole