Fares could drop with Air NZ profit
Air NZ has posted a steep profit drop but tough times for airlines could be good news for travellers.
The airline reported a net profit of $270 million for the most recent year, a steep drop on the previous year’s result of $390m.
It will be the last annual result under chief executive Christopher Luxon, who is stepping down next month after seven years in the top job. He has overseen a long run of success for Air NZ.
Irene King, former chief executive of the Aviation Industry Association and now an independent aviation commentator, said the result was a concern but not unexpected. She said airlines were often one of the first indicators of a changing global economy. It was possible Air NZ’S profits could decline further before they started to improve again. ‘‘A lot is driven by global volatility and that is all looking pretty grim.’’
The airline might look to reduce capacity or cut back on some routes altogether. But it should be good news for travellers, King said, as similar pressures went on all airlines and they had to chase ‘‘every consumer dollar’’. ‘‘What Air NZ is reporting, others will soon report.
‘‘It could be a lolly scramble for the consumer dollar. That should mean some really, really keen airfares both within New Zealand and outbound.’’
Economist Benje Patterson agreed air fares were likely to be lower for longer. ‘‘The prospect of price increases in the near-term, when there are such concerns regarding the demand outlook are unlikely. It would be counterintuitive to lift prices unless you really had to when consumers globally are beginning to get more hesitant.
‘‘Looking ahead, the new chief executive is coming in at a challenging time in the airline’s history. The new chief executive faces the immediate prospect of a rising risk of global recession weighing on international demand. There are also demand risks at the margin by the more environmentally-minded suffering from carbon guilt from excessive flying – a trend which is rearing its head in places like Sweden.’’
Air NZ was one of few airlines remaining profitable through the global financial crisis.
There had been indications its fortunes were turning.
The airline has been through a wide-ranging review after it downgraded its profit guidance for the 2019 financial year, and is preparing for more cost-cutting.
Staff will feel the effects of the lower result, with the company performance bonus cut to $100.
The airline will bring in consultants to help it with further cost-cutting, Luxon said.
He said issues with Rollsroyce engines had been a significant disruption and the high price of fuel – its fuel bill was up $191m – and a drop in the number of inbound and domestic travellers had been challenges.
Air NZ will take delivery of six ATR aircraft and three Airbus A320/321 NEO aircraft in the 2020 financial year. An additional Boeing 787-9 Dreamliner will also join the fleet this year. Earlier this year the airline announced it would replace its fleet of Boeing 777-200 aircraft with the Boeing 787-10 Dreamliner.