Fewer people, bigger profit
The Dominion Post sasy that Air New Zealand is on track to beat its full year, zero profit forecast for 2009 despite carrying fewer passengers in the first two months of its financial year, but analysts warn tough times lie ahead.
The airline’s latest operating statistics show it carried 1.8 per cent fewer passengers in August than a year earlier, but since its June 30 balance date, group yields were up 7.3 per cent.
Short haul yields were up 6 per cent and long haul up 11 per cent.
Air NZ said in August that it would break even for the year to June 2009 if the average price of fuel was no higher than US$140 a barrel. That compares with a $218 million profit last year.
Goldman Sachs JBWere aviation analyst Marcus Curley said while profits were materially down on last year, jet fuel costs had been lower at about US$137 a barrel and yields were stronger in the early months, putting the airline ahead.
“They are tracking slightly ahead of making no money”, in line with market consensus, he said.
But the numbers did not include the impact of recent fare cuts to combat increased competition. At this time of year the airline was expected to make money on the back of school holidays, followed by making little money in November and December before the peak season, and rounding out the year with big losses in May and June, Mr Curley said.
Air NZ is focusing on a strategy of attracting higher yielding passengers over volume at a time when an economy fare does not even cover their cost of fuel.
The airline will double the number of premium economy seats on its Boeing 777-200ER fleet to 36 to meet demand from passengers willing to pay the up to 80 per cent premium for extra space.
Air NZ head of international airline Ed Sims said demand for the premium economy seats had increased 50 per cent in the past year.
The International Air Transport Association said global demand for air travel slowed to just 1.3 per cent growth compared with 5.4 per cent passenger growth in the first half of 2008.
Increased competition and slowing demand has impacted on Air NZ’s domestic and Tasman and Pacific passenger volumes. Domestic capacity has been reduced slightly while short haul international schedule and aircraft size adjustments have led to an overall increase in seat numbers to Australia and the Pacific Islands.
Loads on long haul routes remain at a healthy 81.9 per cent despite a 3.6 per cent increase in capacity.
Asian routes and on to Britain carried slightly fewer passengers, while numbers on routes to North America and Britain were up.
A Report by The Mole
John Alwyn-Jones
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