Air Pacific 40% drop in profit but still makes $21.5m
The Fiji Times reported this morning that Air Pacific made a $21.5million profit before tax at the end of the 2006 financial year, a 40% drop compared to the previous financial year which resulted in a $35.9million profit.
In its 2006 Annual Report, Air Pacific’s MD John Campbell said market and cost conditions were the clear drivers of the results for the year ended March 31, 2006, saying that the airline faced increased competition, slow revenue growth, escalating fuel prices, increased operating costs and global security threats in 2005/ 2006.
He added that revenue growth was unsatisfactory saying, “Competitive no frills airlines, particularly from Australia, have consistently priced airfares at below the direct operating costs of carrying a customer in order to secure market share without regard to profitability”.
Mr Campbell said the airline has had no option other than to meet this predatory practice, adding that competitive pressures have also been evident from New Zealand and North America whist the Japanese origin market remained deeply depressed to all parts of South Pacific.
He confirmed though that Air Pacific was in a financially sound position as it meets the challenges of survival in today’s aviation market, saying, “Shareholders’ equity is now $145.5m, cash flow is sound at $200m, retained earnings passed $100m and our debt/equity ratio stands at 1:0:53.”
He said fuel expenditure for the airline rose by 33%, a cost over which the airline have little or no control apart from hedging.
Mr Campbell said that as the airline looks forward, one concern in respect of Fiji’s tourism growth was emerging, in that Fiji hotels have enjoyed significant occupancy growth over the past three years to a measurable extent stimulated by Air Pacific’s introduction of two B747-400 aircraft in 2003 and by the attractive pricing offered by the airline’s Bula fares, introduced in early 2004, but he said the year ahead would not be a easy one as fuel costs and operational overheads continue to spiral, forcing the airline to constantly seek new ways to control costs and maximise revenue and that the year ahead would again see reduced profit, driven by fuel costs, competitive pressures and a flat Fiji tourism market.
Report by The Mole
John Alwyn-Jones
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