- Pre-tax FY profit leaps 40 pct to NZ$663 mln
- But falls short of NZ$837 mln analysts' estimate
- Surging tourism lures international rivals
- Middle Eastern, Chinese carriers pile in
- Air NZ sees this FY pre-tax profit at NZ$400-600 mln
(Adds executive and analyst comment, shares, details)
Air New Zealand (AIR) said booming tourism helped lift core annual profit 40 percent, but missed analysts' estimates as international rivals muscled in on the action, a trend the carrier said would likely squeeze earnings lower this year.
The airline's shares were volatile as Air NZ said pre-tax profit climbed to NZ$663 million ($485 million) in the 12 months ended June. While that was an earnings record, it was well below the NZ$837 million pencilled in by analysts - and the company said profit could come in significantly lower this year.
"The current year will be choppy as the market adjusts to the increase in overall capacity that has come on board during a relatively short period of time," said Air New Zealand Chief Executive Christopher Luxon, referring to the growing number of airlines flying to the country in a call with analysts.
Shares skidded nearly 3 percent in early trading before recovering to close 0.5 percent lower, helped by the appeal of a one-off dividend from the sale of an 19.98 percent stake in Virgin Australia (VAH).
"Broadly, they (Air NZ) missed expectations because competition is driving yields lower," said Andy Bowley, head of research at brokerage Forsyth Barr.
New Zealand has experienced a boost in tourism and migration in the past year, with Chinese tourist numbers up by nearly a third. Visitor arrivals overall rose 11.2 percent to 3.34 million for the 12 months through the end of July - an economic boon for a nation of 4.7 million people.
That has lured heavyweight international carriers. Qatar Airways and China's Tianjin Airways have recently announced they would start flights to New Zealand, while Emirates [EMIRA.UL] and China Southern are increasing flights to the Pacific nation. There is also increasing competition from a partnership between American Airlines and Australia's Qantas Airways (QAN).
Highlighting the uncertain impact of the competition, Air NZ said pre-tax earnings for the 12 months through June 2017 could be between NZ$400 million and NZ$600 million.
An operator of Boeing Co
787 Dreamliner jets, Air NZ faced questions after Japanese carrier ANA Holdings <9202.T> on Thursday said it needs to replace damaged compressor blades in the Rolls-Royce engines powering its 787s, forcing it to cancel some flights over the coming weeks. A spokeswoman for Air NZ said it hadn't experienced any problems with the engines. "Air NZ operates its 787 fleet very differently to other airlines in that our aircraft operate on long-haul sectors rather than the multiple short-haul sectors that others such as ANA tend to," she said.
($1 = 1.3671 New Zealand dollars)
