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Air New Zealand reports interim profit of $198mil

Air New Zealand recently announced earnings before other significant items and taxation of $198 million for the six-month period ended December 31, 2019, compared to $217 million in the prior period, reflecting the slower demand growth environment, weakness in the global cargo market and the ongoing unrest in Hong Kong.

Earnings before taxation were $139 million and net profit after taxation was $101 million.

Operating revenue growth of three per cent was driven by solid demand across the airline's Domestic and Pacific Islands networks, as well as recently launched services into Asia and North America. This helped to mitigate weaker cargo demand, increased competition on the Tasman and the impact of disruptions in Hong Kong.

Operating costs increased 3.5 per cent in the period, impacted by significant price increases in domestic air navigation and landing charges, as well as a weaker New Zealand dollar. Maintenance costs for third party contracts also increased, however this was more than offset by the related revenues. Fuel costs increased 1.1 per cent, as an improvement in the underlying fuel price was offset by foreign exchange and fuel volumes resulting from growth in the International network.

Ownership costs increased by 7.1 per cent, driven by the arrival of new, efficient aircraft including the airline's 14th Boeing 787-9 Dreamliner in a premium-heavy configuration.

Chairman Dame Therese Walsh says she is proud management continues to execute the strategy that was first communicated to the market in March 2019, whilst quickly adapting the business to the evolving situation surrounding the Covid-19 outbreak.

"Our capacity discipline on existing routes, stimulation of leisure traffic with the domestic fare restructure and entrance into attractive new international markets has driven good revenue performance in the first half. Alongside our focus on profitable top-line growth, we are on track to deliver the long-term sustainable cost savings target from our business review initiatives.

"While the Covid-19 situation is dynamic, we have taken immediate steps to mitigate the impact of softer demand and I am confident that we have the ability to manage the expected short-term impacts effectively," she says.

The Board has declared a fully imputed interim dividend of 11.0 cents per share, in line with the prior period. The dividend will be paid on March 25, to shareholders on record as at March 13.

Chief executive officer Greg Foran acknowledged the Air New Zealand team and thanked them for their contribution to the interim financial result.

"As I travel around the various parts of the business, it is clear that what makes Air New Zealand stand out from its global competitors is the enthusiasm and dedication of our people. Their focus on providing our customers with the best service will continue to be a key differentiator as we look to set the airline up for future success."

During his first 100 days, Greg will undertake a diagnostic of the airline's opportunities and risks. This will provide the basis for determining potential changes to the future strategic direction of the airline.

"Air New Zealand holds a special place in the hearts of New Zealanders and we take that responsibility very seriously. As such, the diagnostic of the airline will look at how we can drive long-term sustainable outcomes for our customers, our staff, the broader community and our shareholders," says Greg.

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