New Zealand-based aviation company Airwork is expanding its fixed-wing fleet, adding 10 Boeing 757s after a $100 million capital injection from new owners Rifa.
Two 757s have already been converted to freight aircraft and delivered to new offshore customers, while the conversion of the remaining eight aircraft will be completed during the next 18 months.
The expansion is part of a big global growth strategy.
It comes amid soft growth in the international air freight sector for most of this year, but Airwork says the e-commerce market is boosting demand for its business, significantly lifting future revenue
Although it is concentrated in the Asia-Pacific region, Airwork has a broad global reach and provides services from heavy maintenance and engineering through to the operation and chartering of aircraft.
The investment comes as Airwork announced its six-month financial result showing net profit for the six months to December of $13.25m, well ahead of the year before ($6.1m) when its full-year profit to June 2018 was $14.73m.
Net profit had fallen from $24.77m in the year to June 2017.
Airwork says its latest-half year is the best result in the company's history. The improved performance came in the face of considerable market headwinds, it says.
The biggest revenue obstacle was retrenchment of the oil and gas industry, which led to reduced demand for services around the world.
Auckland-based Airwork, which began flying in 1936, was successfully listed in 2013 before being bought by Chinese company Zhejiang Rifa and then delisted four years later.
Being Air New Zealand's numbers man when the equation changes
Chief executive Chris Hart says Rifa's financial muscle was crucial.
''Our growth ambitions required a large amount of capital and an investor with a long horizon for a return on investment. Those types of investors aren't easily found in New Zealand. Rifa, however, was a synergistic investor who shared our vision for the company and was able to provide the appropriate level of investment to fund the capital and growth programme.''
Rifa is based in eastern China and has interests in textile machinery, precision machinery, agriculture and animal husbandry, the cultural and sports industry, general aviation and financial investment.
As well as Airwork, Rifa owns Beijing-based Xiya Helicopter Aviation, which also has global operations.
Hart says the company plans to increase its presence in Africa, Australia, Europe, Asia and the Pacific.
"We are still a Kiwi company – the management are predominantly New Zealanders and Australians but our management team will in time come to reflect our global presence, including a new subsidiary in Ireland.
"All but one of the board are locals and Rifa has no plans to change any of that," says Hart.
"What they want us to do is to go global quickly, while retaining a New Zealand-based HQ.''
Airwork owns, operates, leases, maintains and upgrades helicopters and fixed-wing aircraft, providing complete aviation solutions to a range of clients including emergency services, law enforcement, freight operators, tourism ventures and the oil and gas industry. It employs about 400 people across its three divisions.
The fixed-wing division was the major driver of the improved result just announced.
While the company said that division benefited from strong growth in online trading, it did not break out its proportion of revenue.
''E-commerce is a major driver for the fixed-wing revenue now and forecast for the future and is certainly a key component of the growing demand – but is but one element of the overall fixed-wing division,'' says Hart.
The fixed-wing division owns a significant fleet, including 20 Boeing 737 freighters and the 10 757s.
Its Australasia-based airline and maintenance and repair business operates 10 of the planes throughout New Zealand, Australia and the Pacific and has a total of 180 fulltime staff and contractors, including 60 pilots and 80 engineers. The rest of the aircraft are dry leased to operators, mainly in Europe.
Shane McMahon, general manager of the helicopter division, says it has delivered improved returns despite a global downturn in oil and gas activity and is well placed to take advantage of the upswing, when it comes.
He says there has been a shakeout in the global sector, including some companies in administration or receivership, and there are good opportunities for Airwork in the near-to-medium term - "given we've still delivered during a market downturn".
Airwork is involved in a number of critical lifesaving missions around the world and has the ability to deploy at very short notice.
During the past few months the company has supported heightened police and Eagle helicopter activity across the country following the Christchurch terror attacks, and deploying helicopters to fight fires in New Zealand and Australia.
Following storms in Mozambique, the company worked with a global agency to distribute aid.
The global outlook for freight
Airwork is operating in a tough freight market, with the International Air Transport Association (IATA) warning of the threat from trade wars.
Latest figures show air freight demand, measured in freight tonne kilometres, increased slightly in March (0.1 per cent) but that was a significant improvement on February's year-on-year results which saw a drop in demand of 4.9 per cent.
Freight capacity, measured in available freight tonne kilometers, rose by 3.1 per cent year-on-year in March 2019.
Capacity growth has now outstripped demand growth for 11 out of the past 12 months.
IATA director general Alexandre de Juniac says that after four consecutive months of contraction, the March figures were encouraging.
"But the headwinds from weakening global trade, growing trade tensions and shrinking order books have not gone away."
Compounding matters, global economic activity and consumer confidence continues to weaken, while export orders also remain on the wane according to the Purchasing Managers Index.
Despite the worries surrounding the outlook, industry confidence remains upbeat with only 13 per cent of respondents from the association's business confidence survey expecting to see a decrease in freight volumes in 2019 compared to 2018.
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