KEY POINTS:
Air New Zealand has no further plans to cut capacity on long haul flights despite crippling fuel prices which imposed an extra $300 million cost over the past year.
The airline posted a 24 per cent drop in profit for the year to June 30, with normalised earnings
dropping to $197 million.
This was despite a 9.1 per cent boost in operating revenue, up $388m to $4.667 billion for the year.
Air New Zealand has already replaced Boeing 747s with smaller Boeing 777s on some services to London.
Air New Zealand chief executive Rob Fyfe said the network was still under review but no further capacity cuts were planned "at this stage."
By the end of the year one, possibly two fuel hungry 747s could be parked up on the tarmac.
Fyfe warned of a tough year ahead.
The volatile price of jet fuel, due particularly to refining margins and uncertain economic conditions made it difficult to forecaset the result for the 2009 financial year.
However, with jet fuel running currently at around US$136 a barrel margins were already tight. It reached a record $181.85 on July 3.
"Based on the existing hedging policy and network plan, in the current market conditions Air New Zealand expects to operate profitably, on a normalised earnings basis, if the average price of jet fuel is below US$140 per barrel for the 2009 financial year," he said.
Global economic factors were also of major concern.
"At the end of the financial year we saw load factors begin to weaken as a result of increases in ticket prices introduced to cover higher fuel costs," Fyfe said. "We are acutely aware of the need to stimulate demand and will continue to sharpen our domestic and short-haul prices."
Chairman John Palmer blamed a $300m rise in the cost of fuel over the past year.
"Despite fare increases, Air New Zealand continues to only partially recover the increase in the total cost of fuel," he said.
The airline carried 13.2 million customers, up 5.6 per cent on the previous year, and Mr Palmer attributed the higher revenue to additional capacity added both to the domestic and long haul airlines and higher load factors, up 2.8 percentage points to 79.3 per cent.
Air New Zealand declared a fully imputed dividend of 3.5c a share for September 9, bringing the year's total dividends to 8.5c a share.
It said the dividend level would allow it to maintain financial flexibility through "what promises to be a period of significant adjustment for the airline industry".
