Now something must be wrong at Qantas (QAN) (and as we will see, Virgin Australia (VAH) tomorrow), if the latest results from their Trans Tasman rival, Air New Zealand (AIZ), are any guide.
The airline told the ASX this morning that it earned a record net profit of $NZ140 million for the half year to December 31, an increase of 40% on the first half of 2012-13.
Revenue for the period was $NZ2.3 billion, down slightly on the corresponding six months in 2013.
Qantas isn’t paying a dividend – Air NZ declared a $NZ4.5c a share interim dividend, up 50% from last year.
Chairman Tony Carter said in a statement with the results that that with stable fuel prices and a traditional seasonal earnings pattern of a stronger first half, the airline expected to deliver a full-year result of normalised earnings before tax of more than $NZ300 million.
Air NZ owns a share of Virgin Australia and was involved in the now controversial $350 million recap of Australia’s second airline late in 2013. Virgin is expected to report a loss of at least $49 million tomorrow.
AIZ vs VAH vs QAN 1Y – A tale of three airlines – Air NZ soaring
Air New Zealand CEO, Christopher Luxon said this morning. "We are confident that over the coming years Virgin Australia can deliver consistent earnings performance."
"The trading conditions in Australia have obviously been very very difficult. The reality is that [Virgin] has invested really strongly for growth. It is putting itself in a very, very competitive situation. Ultimately in the long term we believe that business can be profitable and that is why we are there," he told the NZ media at a briefing this morning.
He said Air NZ’s improved results were enabling his airline to improve the customer experience, explore new markets and invest in its people and culture.
Mr Luxon said conditions in the Australian domestic market remained tough.
The NZ government sold a 20% stake in Air NZ last November, as part of its partial privatisation plan for state owned assets. This raised $NZ365 million, dropping the Government’s ownership in Air NZ down from 73% to 53%.
Mr Luxon made it clear in his comments to the media and in the profit statement that Air NZ is looking to growth by investing in the business, not slashing costs as Qantas is trying to do.
"We expect to deliver capacity growth of around 8 per cent in the 2015 financial year as new Boeing 787-9s and 777-300s enter our fleet from the middle of this calendar year. Additionally, new Airbus A320 and ATR72-600 aircraft will be growing capacity in our domestic network over the next year."
Mr Luxon said the combination of a competitive cost base and economies of scale achieved through growth will be a material benefit for Air New Zealand in the coming years.
"We have worked hard on improving our cost base in an environment where we have not grown. In fact, we have reduced our capacity flown overall as we realigned our long-haul network.
"With new fleet additions and capacity growth, our scale grows.
"Our new aircraft will be significantly more efficient than those they replace and having fewer aircraft types drives unnecessary complexity out of our operations," he said.
Air New Zealand’s 2014 Interim Results Presentation
