Profits reel as tourists duck war and Sars

By SIMON HENDERY AND AGENCIES

Tourism Holdings and Air New Zealand both tested positive for Sars yesterday, while Qantas' health also deteriorated as a result of the virus.

THL, the country's largest tourist business, coughed up its third profit warning in the past three years, this time blaming Sars and the Iraq war for a downward twist in its full-year profit forecast.

National carrier Air New Zealand blamed those same symptoms for a 4.5 per cent drop in its international passenger traffic when releasing its March operating statistics yesterday.

And across the Tasman, Qantas was also forced to issue another Sars-related profit downgrade.

THL chairman Keith Smith said the company was now expecting an after-tax profit of between $4.5 million and $5.5 million for the year to June 30.

This compares with the forecast of $6 million to $8 million excluding unusual items that was forecast when the company released its interim results in February. Unusual items are expected to add about $500,000 to the bottom line.

"Since the interim results release there has been the Iraq war, and Sars has emerged, impacting international travel negatively and significantly reducing air capacity," Smith said.

In the past three years THL has been hit by restructuring costs, poor performance from its Australian business and the fallout of the September 11 terror attacks.

It has oscillated between issuing profit forecasts which it has failed to meet and not issuing forecasts.

Yesterday it reverted to the later strategy, saying it was unable to make a forecast for next year as the severity and length of the Sars impact on travel patterns was unknown.

The share price slumped 6c in early trade after the announcement, but firmed to close down 3c or 3.2 per cent at 92c.

The number of passengers flying with Air New Zealand fell by 3 per cent in March, compared with the same month a year ago. Total passenger load factor fell 6.8 percentage points to 72.9 per cent for the month, compared with its domestic load factor of 76.4 per cent and an international load factor of 72.4 per cent, down 8.5 percentage points.

Air NZ's Express domestic class traffic rose 8.7 per cent for March, before the traditionally busy Easter period, which was in April this year but bolstered last year's March statistics.

Excluding the domestic operations of Air NZ's budget flyer Freedom Air from the March 2002 figures, traffic was up by 17.5 per cent, a further 8.8 percentage points.

Freedom Air withdrew its domestic service in September 2002 to expand its transtasman services.

Air NZ's international passenger numbers fell 4.5 per cent for the month due to the decline in demand for business and leisure travel as a result of Sars and the Iraq war, the company said.

Across the Tasman, Qantas Airways said it had further downgraded its 2002/2003 profit forecast because of the continued impact of Sars, which chief executive Geoff Dixon said had affected all areas of the airline over recent weeks.

He said there would be further cuts to jobs and expenditure and the airline would widen a cost-saving initiatives, including increased redundancies and the increased use of accumulated leave to reduce staffing numbers.

Meanwhile, Auckland International Airport appears to have developed a resistance to the deadly virus.

The company said yesterday that it did not expect a decline in passenger numbers to have a material effect on its annual profit, which is expected to be about $77 million.

In a gesture to the suffering of airlines, however, AIA said it would rebate landing charges for the last day of April, May and June.

"The effect of this assistance to the airlines has been taken into account in the directors' forecast," it said.