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Current as of 24/05/17 07:40PM NZST
The Business Herald’s markets and banking reporter.

Last-minute Rugby World Cup fans a bonus for Air NZ

Rob Fyfe, pictured at yesterday's annual meeting, says bookings are increasing as the Rugby World Cup progresses. Photo  / Natalie Slade
Rob Fyfe, pictured at yesterday's annual meeting, says bookings are increasing as the Rugby World Cup progresses. Photo / Natalie Slade

Air New Zealand expects a $30 million windfall from the Rugby World Cup and is still getting bookings from overseas fans three weeks into the tournament.

Chief executive Rob Fyfe said yesterday that demand was increasing as the event progressed.

"We're really happy with the World Cup demand that we've seen and in fact as we look through to October it's going to get even stronger."

Speaking after the NZX-listed airline's annual shareholders' meeting in Auckland, Fyfe there had been no unexpected logistical problems ferrying cup visitors and - thankfully - no return of volcanic ash clouds.

But some flights are not full to capacity, with Air New Zealand getting late bookings from overseas.

"As people start to see how their team's performing ... people are still deciding to come out [to the World Cup]."

Fyfe said there had been a slowdown in the number of New Zealanders travelling domestically as a result of accommodation in many parts of the country being fully booked.

The airline was originally expecting a $40 million benefit from the cup but this was downgraded to $30 million when games in Christchurch were cancelled after the February 22 earthquake.

Fyfe said the Rugby World Cup was a huge brand-building opportunity for the national flag-carrier.

"We're getting so many first-time flyers on board our aircraft," he said. "People experience our service and hopefully we'll pick up business from that."

Fyfe said the company's move this week to increase its stake in Australian partner Virgin Blue by 5 percentage points to 19.99 per cent was defensive in that it ensured no other carrier could buy in to the ASX-listed airline.

Air New Zealand paid A$32.8 million ($41.3 million), or 29.7c a share, to increase its equity in Virgin to the limit for allowed for approval by the Australian Foreign Investment Review Board.

Fyfe said the equity stake and the transtasman alliance Air New Zealand entered with Virgin late last year was the "lowest risk, highest return" strategy for competing in Australasia against its biggest rival - Qantas.

Through the alliance the two airlines code-share on Tasman routes and connecting domestic flights and offer reciprocal frequent flyer and lounge access agreements.

Air New Zealand had considered buying an airline in Australia, or moving into that country's domestic market in its own right, but decided the partnership with Virgin was the best way forward, Fyfe said.

An analyst predicted at the start of this year that Virgin and Air New Zealand - which were both keen to target the 90 per cent of the Australian corporate market held by Qantas - would be working together as one airline within two years.

Fyfe said the company had not discussed with Virgin the possibility of a representative of New Zealand's flag-carrier getting a seat on the Brisbane-based airline's board.

"But as an almost 20 per cent shareholder that's certainly something we'll now consider," he said.

"Normally, if you have a stake of that size the option of a seat on the board would be something that's available."

Air New Zealand chairman John Palmer told investors at yesterday's meeting that the "turbulence and turmoil" in international financial markets was a concern.

"The challenge for us, as always, is to continue to adapt at speed whilst utilising our innovation and balance sheet strength to outperform peersand increase shareholder returns," he said.

Fyfe said the storm clouds gathering over the global economy did not cause him too much concern.

"What I'm focused on is that, if things do change, that we can adjust our business very quickly."

Air New Zealand shares closed yesterday up 1c at $1.09.

- NZ Herald

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