Air NZ flags double-digit capacity growth after reporting 24 per cent lift in full year profit

Normalised earnings before tax came in at NZ$496 million, an increase of 49 per cent from the prior year, Air NZ said on Wednesday.

Revenue rose six per cent to NZ$4.925 billion.

The Star Alliance member is forecasting further profit growth in the year ahead despite the jitters in global markets from the slowdown in China and shifting exchange rates.

Air NZ chief executive Christopher Luxon says there are lots of opportunities for the airline across all the markets it operates even with some of those macroeconomic challenges.

“We adapt to changing circumstances I would argue better than any airline in the world,” Luxon told reporters during Air NZ’s full year results presentation in Auckland on Wednesday.

“We have a very strong business across Asia, Australasia and the Americas and I would say there is still lots of gold to extract.

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“Our experience in the US, European and even Asian slowdowns has been there are still big segments of customers that are largely unaffected by the macroeconomics.”

Air NZ has forecast capacity growth of 11 per cent across its domestic and international network for the full 2015/16 financial year.

The trans-Tasman and Pacific Islands market was expected to grow by four per cent, while the number of domestic NZ seats was tipped to increase by eight per cent.

Luxon said Air NZ’s new Auckland-Houston and Auckand-Buenos Aires services, which kick off in December, were selling “incredibly well”, particularly in Australia.

“We are already starting to talk about how we would get increased capacity into those routes,” Luxon said.

“We think Australia is underserved and we think there is a huge opportunity to haul Australians through Auckland, which is a great geographic hub into Latin America.

“Already we are seeing our mix of Australian customers more than meeting our original assumptions.”

Air NZ has been promoting one-stop connections from Australia to the Americas via its Auckland hub and earlier this year launched extra Perth-Auckland flights timed to connect with its long-haul trans-Pacific services.

The airline’s alliance with Virgin Australia covers only trans-Tasman routes and does not include services to the Americas.

Air NZ noted in its financial results Australians made up the largest overseas membership base of its Airpoints frequent flyer program, with the number of members on this side of the Tasman up by 20 per cent in the past year.

Meanwhile, Luxon said he was confident Air NZ would be able to stimulate the market to absorb the eight per cent seat growth on its domestic network even with the upcoming entry of Jetstar, as well as other smaller carriers, on regional routes.

Luxon said the arrival of Jetstar with its five Q300 turboprops “isn’t something we should get too freaked out about”.

“I really feel very comfortable in our ability to compete there,” Luxon said.

“We just need to keep it in perspective. I think it has been a bit overblown to be really honest.

“From a cost advantage point of view we have a huge advantage over Jetstar coming into that market.”

Air NZ would offer more than two million domestic fares for sale at less than NZ$100 during the year ahead, adding that the ATRs used to serve regional destinations were the best turboprops in the world with low operating costs.

Jetstar planned to commence operations on new regional routes from December with a fleet of five Q300 turboprops that will be flown by QantasLink’s Eastern Australia Airlines.

In terms of the outlook, Air NZ chairman Tony Carter said the airline was expecting an improved financial result in the current year.

“Our investment in new efficient aircraft, the continued development of our alliance partner relationships, world class sales and marketing execution, great customer service and strong focus on cost management have enabled Air New Zealand to achieve revenue growth against a stable cost base,” Carter said in a statement.

“Given the current known operating environment, along with our increased capacity and improved operating efficiencies, we expect to achieve significant earnings growth in the coming year.”