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Air NZ posts second-half loss on costs of quakes

Air NZ posts second-half loss on costs of quakes, relief efforts

By Paul McBeth

Aug. 25 (BusinessDesk) – Air New Zealand Ltd., the national carrier, posted a second-half loss as earthquakes in Canterbury and Japan disrupted services and led to unprofitable ‘compassionate’ fares for Christchurch residents.

The loss was $37 million in the six months ended June 30, the Auckland-based company said in a statement. In the full year, earnings before changes in the value of hedging contracts fell 11% to $82 million as sales climbed 7% to $4.34 billion.

The natural disasters wiped about $70 million off full-year earnings and resulted in a second half that was the “most difficult Air New Zealand has faced in the past decade,” chief executive Rob Fyfe said.

Earnings were eroded by “the combination of reduced demand for travel as a
result of the devastating Christchurch and Japan earthquakes, additional capacity into Christchurch to assist the relief effort and compassionate fares for those affected by the Christchurch earthquakes,” he said.

Still, Fyfe got a 12.5% pay rise in his base salary to $1.35 million in the 2011 financial year and received almost $350,000 in his short-term incentive plan to be paid next year, down from $438,000 in 2010.

The airline reported a 6.3% annual increase in the number of passengers carried to 13.1 million. Revenue passenger kilometres rose 4.5% to almost 27 million. Net profit slipped 1% to $81 million, or 7.5 cents per share.

The airline said it expects a better financial performance in the 2012 year, provided the global economic conditions don’t deteriorate and fuel prices stay stable.

It will pay a final dividend of 2.5 cents a share, trimming the annual payout to 5.5 cents a share from 7 cents in 2010.

The shares fell 0.9% to $1.10 when the NZX opened today and have dropped 27% this year.

The government plans to sell down its 73.7% stake in the airline to just over 50% as part of its partial privatisation programme, and is using this year’s election as a barometer of public appetite for the proposal.

The airline is mulling a $150 million issue of five-year unsecured corporate bonds. Air NZ said it faces a potential tax bill of about $100 million in relation to the tax treatment of contracts to buy aircraft.

(BusinessDesk)

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