Air New Zealand hosted its 2017 Annual Shareholders Meeting in Auckland yesterday, highlighting key results of the last year and the outlook for the future.
Key takeaways from the meeting:
Air New Zealand chairman: Carrier’s financial position is fundamentally very strong
Air New Zealand chairman Antony Carter said the carrier is “fundamentally in a very strong position”, with cash holdings of NZD1.4 billion (USD1 billion) and gearing at 51.8%, which is within the target range of 45% to 55%. According to Mr Carter, as the carrier enters the last phase of its multi‐year fleet investment programme, it continue to expect the balance sheet to remain “robust”.
Air New Zealand ‘very optimistic’ about market dynamics compared to 12 months ago
Air New Zealand CEO Christopher Luxon said he is “very optimistic about the market dynamics” at present compared to the same time in 2016, when the carrier was “facing an unprecedented level of competition in our 77 year history”. Key outlook highlights include:
- Mr Luxon noted that from an industry perspective, Air New Zealand feels good about the “rational capacity decisions” made by competitors over the past four to six months. Both American carriers (American Airlines and United Continental) have decided to cease flying to New Zealand over the 2018 winter season;
- The airline has also witnessed “some carriers” pull off trans Tasman routes. In the domestic market, major domestic competitor Jetstar Airways has reduced some of their regional services;
- From a macroeconomic perspective, Air New Zealand sees strength in the New Zealand economy, which supports domestic and outbound travel. Inbound tourism is still strong, “although growing at a slower level than last year” said Mr Luxon.
Air New Zealand ‘optimistic about the market dymanics’ of many regions where it operates
Air New Zealand chairman Antony Carter reported competitive conditions “start to stabilise” for the airline during H2FY2016-17 and as the carrier looks to FY2017-18, it is “optimistic about the market dynamics across many of the regions where we fly, and we have been pleased with our performance in the first quarter of trading”. The carrier is “aiming to improve upon 2017 earnings” of NZD527 million (USD380 million). The carrier’s outlook assumes an average jet fuel price of USD60 dollar per barrel. Mr Carter noted that jet fuel trading was within that level for the first two months of 2017, it is currently trading higher and has been volatile over the recent weeks.
Air New Zealand outlines network plans for FY2017-18 with ‘targeted areas’ of growth
Air New Zealand CEO Christopher Luxon said reported that based on market dynamics for the coming year, there are “targeted areas” where Air New Zealand will be growing.
- Overall network: Capacity to grow by 4%-6%. This is a “continuation of a network strategy that plays to our strengths” said Mr Luxon. Air New Zealand is “making great progress in building new and existing markets and driving profitable growth everywhere in our network” said Mr Luxon, which is supported by the “fuel efficient and simplified fleet”;
- Domestic network is a “key pillar of our strategy”, with capacity to grow by 4%-6%, which will be driven by “continued strong demand” to Queenstown, Christchurch and Dunedin, as well as additional frequencies into some regional markets. Tourism in New Zealand is in “great shape”, generating NZD14.5 billion (USD10.5 billion) in export earnings and in 2017 annual visitor arrivals surpassed the 3.6 million;
- Tasman and Pacific Islands network to grow between 8% to 10%. Tasman growth will include more widebody operations, which links to the carrier’s Australian strategy to link North and South America via Auckland;
- Pacific Islands network is planned to grow between 15% and 20%, driven by increased frequencies to Honolulu and Bali, which have been “incredibly popular with our customers”. It also includes more widebody flying on routes such as Samoa and Fiji;
- Long haul international network growth of 3% to 5%. Two thirds of growth will be generated from the introduction of a new service to Tokyo Haneda, launched in Jul-2017. Mr Luxon said Air New Zealand has a strong focus on strategically growing the Japanese market, with the Haneda service complementing the existing Tokyo Narita route. The remaining capacity growth will consist of increased flying to North and South America over the summer season.
The CAPA-ACTE 2017 New Zealand Aviation & Corporate Travel Summit, scheduled for 17-18 October, at the Grand Mercure Auckland, will include variety of thought provoking discussions and keynote speeches. To find out more or register click here.