Air New Zealand earnings drop

Air New Zealand announced earnings before taxation for the 2024 financial year of $222 million compared to $574 million for the same period last year. This was an expected reduction on the prior year, when the airline recorded one of its highest ever results following the reopening of New Zealand’s border. Net profit after taxation was $146 million. While Air New Zealand reported a solid first half result, the second half of the financial year proved increasingly challenging as the impact of operational and economic headwinds became more pronounced. The tougher economic backdrop in New Zealand drove a deterioration in domestic demand in the second half, particularly for corporate and government segments. Accelerated maintenance requirements for Pratt & Whitney PW1100 engines worldwide have meant that up to six of the airline’s newest and most efficient Airbus neo aircraft have been out of service at times. Ongoing additional maintenance requirements on the Trent 1000 engines that power the existing Boeing 787 Dreamliner fleet and reduced levels of spares in the market have meant that up to three Dreamliners are also on the ground at times. These issues, alongside elevated competition from US carriers and the cumulative effect of high inflation, have had a significant impact on the airline’s operational and financial performance for the 2024 financial year. Passenger revenue increased 11 percent to $5.9 billion, driven by a 23 percent ramp-up in capacity, primarily across the international long-haul network. This was partially offset by the weaker demand environment and higher levels of competition. Also included within passenger revenue is $90 million of credit breakage for unused customer credits that were considered highly unlikely to be redeemed. While average jet fuel prices were slightly lower for the year, total fuel costs increased by around $190 million, driven by capacity growth across the network. Non-fuel operating costs increased faster than revenue, also driven by the increase in capacity, as well as broad based inflation across the cost base. Non-fuel operating cost inflation of approximately $225 million was a significant drag on the airline’s financial performance. With landing charges, air navigation fees and engineering materials leading the increases, the non-fuel operating cost uplift of six percent for the year brings the cumulative impact of inflation across the past five years to 20 to 25 percent. While growth in the network has provided some scale benefits, productivity remains below the levels achieved pre-Covid as the airline carries extra costs to help manage ongoing disruptions in the supply chain. Based on the airline’s balance sheet strength and the result announced today, shareholders will receive a final unimputed ordinary dividend of 1.5 cents per share, taking the total ordinary dividends declared for the year to 3.5 cents per share. The dividend will be paid on 26 September, to shareholders on record as at 13 September. Chairman Therese Walsh acknowledged the hard work and efforts of 11,700 Air New Zealanders who have risen to the raft of challenges the airline has faced. “It’s been a difficult year managing both macroeconomic and operational challenges. I’d like to thank the Air New Zealand whānau, not only for navigating these issues with great skill and manaaki, but also for never losing sight of what the organisation needs to do to be a future-fit airline. We know these challenges will pass, some faster than others, but they have had a significant impact on our financial performance this year. Today we announced earnings before taxation of $222 million and estimate earnings would have been around $100 million higher, net of compensation, had we been able to operate our aircraft and schedule as intended.” Walsh went on to note that despite the near-term challenges, the airline remains focused on opportunities to improve returns, while staying true to its culture and commitment to provide a world-class travel experience for customers. “Our balance sheet is robust, with capacity to prudently manage these headwinds while investing sensibly in the areas that matter for our people and our customers. We believe in the strength of our plan and our team and are excited about the opportunities ahead as we move out of this current cycle.” In the face of extensive external disruptions, Chief Executive Officer Greg Foran thanked customers and Air New Zealanders alike for their ongoing support. “I want to acknowledge the understanding and loyalty of our customers who were impacted by unavoidable scheduling changes while travelling with us this year. We do not take our customers choice to fly with Air New Zealand for granted and are grateful for the patience they have shown us. We took immediate action to minimise the disruption, leasing three Boeing 777-300ERs, securing additional spare engines and adjusting our network and schedule to deliver greater reliability. We are very proud of what our team managed to achieve, but we know it has been far from perfect for impacted customers. The challenges we are facing are not unique to Air New Zealand. Supply chain and aircraft delivery delays, growing costs and a shortage of labour in key areas like engineering are major issues facing many airlines across the global aviation industry. However, the reality is that while these issues continue to play out, Air New Zealand is expecting a challenging year ahead.” For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Kay Rolland at [email protected]