Air New Zealand financial results hit by increasing costs as it flies into turbulent 2020

Air New Zealand's financial results for the six month period ending December 31 reveal the airline ended 2019 in a relatively good position as it headed into a very disruptive beginning to 2020.

The national carrier's earnings before other significant items and taxation was $198 million for the six-month period ended December 31, down from the $217 million it recorded for the six months previous.

As the figures reflect business activity up until the end of December, they don't reveal the financial cost to the airline from the current coronavirus outbreak. 

However, the financial effects of ongoing unrest in Hong Kong are reflected in the results.

Solid demand across Air NZ's domestic and Pacific services played a large part in the 3 percent increase in its operating revenue.

The airline said growth in these areas as well as in North America and Asia helped mitigate weaker cargo demand, increased competition on Tasman routes and the impact of disruptions in Hong Kong.

Interim Financial Highlights

  • Operating revenue of $3 billion
  • Earnings before other significant items and taxation of $198 million
  • Earnings before taxation of $139 million
  • Net profit after taxation of $101 million
  • Operating costs increased 3.5 percent in the period
  • Fuel costs increased 1.1 percent
  • Fully imputed interim dividend of 11.0 cents per share, consistent with prior period

The airline said "significant price increases in domestic air navigation and landing charges" as well as a weaker New Zealand dollar contributed to the increase in operating costs of 3.5 percent.

Looking forward:

In February, Air NZ announced it had taken immediate steps to mitigate the impact of the drop in demand on some parts of the airline's network due to the coronavirus outbreak.

The airline has temporarily suspended its flights to Shanghai and Seoul, and reduced capacity on services to Hong Kong and Japan.

The drop in inbound international travellers has also resulted in a drop in the number of people travelling to and from Christchurch and Queenstown.

Air NZ expects the coronavirus outbreak will cost it between $35 million and $75 million.