WELLINGTON: Air New Zealand chief executive Christopher Luxon has declared that it is time for the Australian carrier to “get profitable”. Air NZ is the largest shareholder in Virgin with a 25.9 per cent stake. As a result of Mr Luxon joining the Virgin board last July, the Kiwi carrier had to include Virgin’s results within its own bottom-line results for the first time in the first half of the financial year.
Virgin’s losses have narrowed in the last six months and that has been important”. But there is certainly a lot more to do in terms of, the capacity war is now over, we have a resurgent competitor in Qantas Airways, the investments have all been made and now it is time to get profitable.
Air NZ on Wednesday reported underlying earnings before tax to $NZ216 million ($206.5 million), driven by strong revenue growth, increased capacity and higher fares across the network. But the airline’s statutory net profit after tax declined by 6 per cent to $NZ133 million, in part because it had to recognise $NZ14 million for its share of losses from Virgin. Air NZ declared a fully-imputed dividend of NZ6.5c per share, up 44 per cent on the same period last year.
Virgin reported a bottom-line loss of $47.8 million in the first half, although it reported an underlying pretax profit of $10.2 million. Rival Qantas is expected to report an underlying pretax profit of $300 million to $350 million on Thursday, although the bottom line result is likely to be lower due to restructuring charges.
Mr Luxon said Air NZ was “very comfortable” with its 25.9 per cent stake in the airline, despite Etihad Airways having last month raised its stake to 24.2 per cent, presumably with Foreign Investment Review Board permission to lift its stake as high as Air NZ. He declined to reveal if Air NZ wanted to remain the largest shareholder in Virgin over time. Singapore Airlines, which is an alliance partner of Virgin and Air NZ, holds a 22.8 per cent stake in Virgin.
Air NZ had not provided profit guidance for the first half of the financial year. However, in November the airline said there would be a “significant improvement” in its second-half earnings if fuel prices remained low. Air NZ chairman Tony Carteron Wednesday said fuel prices were now lower than in November and sales momentum had been maintained, further strengthening the company’s outlook.
