Air New Zealand has again boosted its annual profit for the fiscal year through June 30, which will help the carrier accommodate the significant investments it is making in fleet growth and lounge upgrades.
The airline reported a net profit of NZ$262 million ($219.5 million), up from NZ$181 million in the previous year, while its pre-tax earnings of NZ$357 million were up 40%. This is the third consecutive year in which Air New Zealand has increased profits.
Air New Zealand is planning to spend NZ$2.2 billion on fleet upgrades during the next four years, and it will also spend NZ$40 million over the next year on a program to upgrade or build new airport lounges.
CEO Christopher Luxon said fleet spending, in particular, represents “an unprecedented level of investment” for the airline. He noted that an “incredibly strong” operating cash flow means this is “quite digestible” financially and “not a stretch in any way.”
The relative strength of the New Zealand dollar has caused a few headaches on the revenue side, particularly on routes to Australia, Luxon said. However, the stronger dollar has also helped reduce costs, so overall there has been “only a slight impact” from unfavorable foreign exchange movements.
The transtasman routes to Australia have generally been performing well, and the Air New Zealand-Virgin Australia partnership accounts for a 52% share of this market, Luxon said. He added that further growth opportunities exist, and the carrier is planning for about 3% capacity growth per year on Australian routes.
Air New Zealand’s lounge upgrade program will include refurbishing its flagship facilities at Auckland and Sydney airports, and other lounges in Australia and New Zealand will also be improved. Within the next few months, the airline plans to open a lounge in the Auckland domestic terminal specifically for its regional turboprop gates.
The carrier’s fiscal year 2014 results were driven by passenger revenue increasing 4.9% to NZ$3.9 billion. Traffic climbed 1.2% on a 0.7% capacity increase, resulting in load factor rising 0.5 points to 84.1%. Capacity is expected to rise by 6% in the fiscal year through June 2015, thanks mainly to fleet expansion.
Yield was up 1% overall in fiscal 2014, although excluding the effects of foreign exchange movement it would have increased by 3.3%.