Unlike loss makers, Singapore Airlines and Cathay Pacific, or Emirates which reported a big slump in 2016 profits, airlines in Australasia are doing well (with the exception of Virgin).
Qantas (QAN) is expecting another solid result and has already upgraded its profit estimate for the year to June 30 and Thursday morning Air New Zealand (AIZ) joined in with an upgrade of its own.
And of course Warren Buffett and his company, Berkshire Hathaway have rediscovered the ’joys’ of airline ownership and emerged as big shareholders in America’s four largest American, Delta, Southwestern and United Continental.
Both Air NZ and the Australian regional carrier, Rex (REX) issued earnings upgrades yesterday.
Rex is now looking a three fold jump in full year profit from the original estimate of a rise similar to the 88% jump in first half earnings, while Air NZ is looking at a 10% rise.
Air NZ told the ASX and NZX that it now expected earnings before tax to exceed $NZ525 million ($US371.81 million).
The airline had said in reporting its half-year results in February that it forecast full-year earnings of $NZ475 million to $NZ525 million.
That was after a sharp fall in profit in the six-months to December 31. While it was the second best first half result in the company’s history, it nevertheless was a 24% slump to a pre-tax result of $NZ349 million.
Admittedly it was coming off a record 2015-16 performance when earnings jumped 42% for the full year.
But now the slide seems to have either slowed or been reversed, according to a presentation at its investor day on Thursday.
If the forecast results are met, they would be the airline’s second-highest ever after it posted record earnings before tax of $NZ663 million in full-year 2016 thanks to a booming New Zealand economy, record tourism levels and especially lower jet fuel prices.
Investors in Australia liked the news and bid the shares up 5.5% and they closed at $2.88.
Rex directors told the ASX yesterday afternoon that after reviewing the results for the first 10 months of the financial year the board now sees operating profit after tax for the full year would now be “in excess of 250%” above the result in 2015-16. That would put the figure above $12 million.
Directors said that since the update with the interim result in February (when they said operating after tax profit was expected to be up by around 88%, the size of the first half improvement) “the group has experienced a steady improvement in trading conditions and the board is now confident that the full year operating profit after tax will be in excess of 250% over the prior year.”
The company said that should the improvement continue in the remainder of the year, a final dividend will be paid.
Rex shares jumped 4% to $1.02 yesterday.
