Air New Zealand's second highest ever profit, bonuses for staff

An Air New Zealand Boeing 777 flying on its way to the Los Angeles. Photo / AP

Air New Zealand has announced pre tax earnings of $540 million, the second highest profit in the airline's history, and it will pay staff an $1800 bonus.

Net profit after tax grew 2.1 per cent to $390m.

Staff bonuses of up to $1800 will be paid to all permanent employees who do not participate in a short-term incentive programme.

Chairman Tony Carter said the result demonstrated the airline's resilience.

"This is an impressive financial result, driven by strong revenue growth across the airline's key markets, as well as continued focus on sustainable cost improvement, despite significantly higher fuel prices.''

About 8500 staff will be paid the bonus next week.

The airline has paid bonuses before. In 2016, when it recorded its best-ever annual result it paid out $20.5m in bonuses. More than 8000 staff enjoyed a $2500 bonus then.

And last year when pre-tax earnings dropped to $527m, it handed out a $1700 bonus.​

This year's result was in line with analysts' forecasts. A Bloomberg poll of five analysts forecast a pre-tax profit of between $543m and $571m with an average figure of $553m.

Fuel costs contributed another $160 million to costs although this was partly offset by opertating efficiencies of $104 million.

During the past year, the airline has battled with disruption to its network caused by the Marsden Pt fuel pipeline rupture, severe storms affecting its domestic operation and international flights and some of its Dreamliners pulled from service at times for repairs.

The airline estimates continued costs of schedule changes will hurt next year's result by between $30 million and $40 million. This means, based on an average jet fuel price of $US85 ($126) a barrel, underlying earnings would drop to be between $425m and $525m.

Operating revenue increased by $376m to $5.5 billion, an increase of 7.4 per cent
per cent on the prior year. Passenger revenue increased by $303m to $4.7 billion, a 6.9 per cent increase.

Chief executive Christopher Luxon acknowledged the impact of external disruptions on the airline's operational performance and thanked customers and staff for their loyalty and support.

Customers have complained about some leased planes and having their plans disrupted.

He acknowledged some service was below par.

"These disruptions have resulted in a level of service for some that did not meet the high standards we set for ourselves,'' said Luxon.

To deliver greater schedule reliability for customers, Air New Zealand will be leasing three
widebody aircraft, two Boeing 777-200s and one Boeing 777-300, as well as making adjustments to its schedule as the airline continues to work through the maintenance requirements associated with the global Rolls-Royce Trent 1000 engine issues.

"The adjustments to our schedule will essentially free up two widebody aircraft enabling us to provide greater schedule certainty for customers.''

This would include adjusting weekly frequency on Buenos Aires and upcoming Taipei services, as well as seeking to re-time flights to Tokyo's Haneda Airport.

''We are confident that these proactive steps will result in better reliability for our customers," said Luxon.

He said the airline would next year offer more cheap fares than ever as domestic jet capacity grows by 3 to 5 per cent and regional turboprop capacity grows by 5 to 7 per cent.

"One of the benefits of a growing Air New Zealand is more opportunities than ever for Kiwis to snap up a bargain. In 2019, we will offer more than 2.9 million seats for travel in New Zealand for under $100."

The airline this year will launch new direct services to Chicago and Taipei commencing in November, new services to Brisbane from both Wellington and Queenstown beginning in December, as well as a new third daily service added to the Auckland-Singapore route in partnership with Singapore Airlines.

It is expecting to take delivery of 10 Airbus A320/321 NEO aircraft, which will provide continued growth and cost benefits to the Tasman and Pacific Islands network. Air New Zealand will be the first airline to fly the Airbus NEO in Australasia.

Two Boeing 787-9 aircraft with increased premium cabin space and next-generation Rolls-Royce TEN engines (unaffected by the current problems) will also join the fleet.

Luxon says the airline sees positive demand signals in the short term, with strong forward bookings heading into the peak summer season and passenger growth expected to continue its upward trajectory.

"Looking out over the next two years, the airline is expecting to grow by one million customers a year, reaching 19 million customers by the end of 2020," Luxon said.

Rolls-Royce Trent Package C engines used by the airline on many of its Boeing 787s need more checks and in some cases lengthy repairs to turbine and compressor blades. Other aircraft have been used to fill in on routes as there are now limits on how far Dreamliners still subject to extra checks can fly from airports.

Air New Zealand has used charter planes from Portugal's Hi Fly and a Boeing lease operation.