Fyfe signals challenges for Air NZ

Air New Zealand chief executive Rob Fyfe said 2011 was a tough year for the airline and 2012 is shaping up to be just as challenging because of ongoing economic instability in Europe.

Fyfe was speaking on the tarmac at Auckland airport after a 15-hour flight from Boeing's headquarters in Seattle on Air NZ's latest addition to its fleet - a new Boeing 777-300ER painted in black to reflect the airline's sponsorship of the New Zealand Rugby Union and All Blacks.

"It's been a challenging period, and in terms of our market guidance we have indicated that we are profitable, but it is tough," Fyfe said.

Air New Zealand last year announced "normalised" pre-tax earnings of $75 million for the 12 months to June 30, 2011, down 45 per cent from the previous financial year.

Market expectations for the 2012 year are for a net profit of $90 million-$150 million, with the average sitting at around $128 million. The earnings decline in 2011 reflected the dual effects of the Christchurch and Japan earthquakes.

Fyfe expected trading conditions to remain challenging.

"What is happening in Europe is not just a European issue - it's affecting markets right around the world - but we are confident that we can adapt our business and remain profitable. We just have to be quick on our feet."

Fyfe said the Government remained supportive, despite its plan to sell down its 74 per cent stake.

"Whether they have a 74 per cent stake or a 50 per cent stake, it does not really change the way in which we operate," he said.

The airline is conducting a review of its long-haul routes but no announcements are imminent, an Air NZ spokeswoman said.

The 777-300 is the replacement aircraft for the airline's ageing Boeing 747 fleet, which is being phased out.

The new plane carries about 340 passengers compared with around 380 for the 747, but the twin-engined aircraft offers far greater fuel efficiency.

For the trip from Seattle, the 777-300 burned about 100 tonnes of fuel, compared with the likely consumption of about 140 tonnes for a 747 over the same distance.

The new plane is the fifth and final 777-300 to be added to the fleet. Air NZ shares last traded at 87c, down 42 per cent from this time last year.