Spread the love

Post Views: 102

Air New Zealand has unveiled its 2024 financial year results, revealing a significant drop in earnings amidst a challenging operational and economic landscape. The airline reported earnings before taxation of $222 million, a sharp decline from the previous year’s $574 million. This marked a tumultuous period as the company faced multiple headwinds. Despite these challenges, the airline declared a final unimputed dividend of 1.5 cents per share, bringing the total ordinary yearly dividends to 3.5 cents per share.

A Year of Highs and Lows: Navigating Operational Challenges

The 2024 financial year has been a rollercoaster for Air New Zealand. While the year’s first half saw solid performance, the second half was marred by a series of operational setbacks that significantly impacted the airline’s profitability. A softer domestic demand, driven by a more challenging economic backdrop in New Zealand, particularly in the corporate and government segments, and elevated competition from US carriers, took a toll on the airline’s financial performance.

Operational challenges also played a crucial role in the financial downturn. The global accelerated maintenance requirements for Pratt & Whitney PW1100 engines have led to the grounding of up to six of Air New Zealand’s Airbus neo aircraft at different times throughout the year. Furthermore, ongoing maintenance issues with the Trent 1000 engines that power the airline’s Boeing 787 Dreamliner fleet, compounded by reduced availability of spare parts in the market, meant that up to three Dreamliners were also out of service at times. These disruptions and the cumulative effect of high inflation significantly hampered the airline’s ability to operate efficiently.

Resilient Performance Amid External Pressures

Despite the challenges, Air New Zealand demonstrated resilience with a reported passenger revenue increase of 11%, amounting to $5.9 billion. This growth was primarily driven by a 23% surge in capacity, particularly across the international long-haul network. However, a weakened demand environment and heightened competition partially offset this. The passenger revenue includes $90 million from customer credits considered unlikely to be redeemed, highlighting the ongoing impacts of past disruptions.

The airline also faced rising fuel costs, with total fuel expenses climbing by approximately $190 million, driven by increased network capacity. Non-fuel operating costs significantly rose, adding an estimated $225 million to the airline’s expenses. This non-fuel cost inflation, primarily in landing charges, air navigation fees, and engineering materials, has added to the financial strain. The cumulative impact of inflation across the past five years has reached 20 to 25 percent, eroding the airline’s profitability despite network growth.

Dividend Announcement: A Signal of Confidence

In a statement reflecting the airline’s resilience, Air New Zealand’s Chair, Dame Therese Walsh, acknowledged the tough year but expressed confidence in the airline’s future. “It’s been a difficult year managing both macroeconomic and operational challenges. I’d like to thank the Air New Zealand whānau for navigating these issues with great skill and manaaki, never losing sight of what the organisation needs to do to be a future-fit airline,” she said.

Despite the near-term challenges, Dame Therese emphasized the airline’s strong balance sheet, which she described as “robust, with capacity to prudently manage these headwinds while investing sensibly in the areas that matter for our people and customers.” Declining a final unimputed ordinary dividend of 1.5 cents per share is a testament to the airline’s confidence in its long-term strategy and financial stability.

CEO’s Perspective: Addressing Immediate Challenges

Chief Executive Officer Greg Foran echoed the sentiments of resilience, thanking customers and staff for their continued support during a challenging year. “I want to acknowledge the understanding and loyalty of our customers impacted by unavoidable scheduling changes while travelling with us this year. We do not take our customers’ choice to fly with Air New Zealand for granted and are grateful for the patience they have shown us,” he said.

Mr. Foran highlighted the immediate actions to mitigate operational disruptions, including leasing three Boeing 777-300ERs, securing additional spare engines, and adjusting the network and schedule to enhance reliability. Despite these efforts, Mr Foran admitted that it has been “far from perfect” for customers affected by the disruptions.

He also underscored that Air New Zealand’s challenges are not unique but part of broader global trends affecting the aviation industry, including supply chain issues, aircraft delivery delays, rising costs, and labour shortages in key areas such as engineering. However, Mr. Foran assured stakeholders that Air New Zealand remains fundamentally well-positioned and will not allow the current environment to distract the airline from its long-term goals.

Strategic Focus: Investing in the Future

Looking ahead, Mr. Foran reiterated Air New Zealand’s commitment to its long-term strategy, emphasizing the importance of controlling what can be controlled and maintaining a relentless focus on customers and employees. “As we continue to navigate this difficult environment, we remain focused on the big picture—controlling what we can, relentlessly focusing on our customers and our people, and investing for the future,” he said.

A key priority for Air New Zealand remains delivering excellent customer service and offering a range of competitive fares. To achieve this, the airline will implement targeted cost adjustments, including a 2 percent reduction in headcount and improvements in the controllable cost base. Additionally, the airline plans significant investments in its fleet, with aircraft-related capital expenditure expected to reach $3.2 billion over the next five years. This includes a comprehensive, multi-year interior retrofit program for its 14 existing Dreamliner aircraft, with the first new GE-powered Boeing 787-9 expected to be delivered by the end of 2025.

Outlook: Preparing for Continued Challenges

As Air New Zealand prepares for the 2025 financial year, the airline is bracing for ongoing economic and operational challenges, particularly in the year’s first half. Mr. Foran concluded on a note of cautious optimism, stating that while the airline is prepared for continued headwinds, it remains focused on its strategic objectives and long-term growth.

In summary, Air New Zealand’s 2024 financial year results underscore the airline’s ability to navigate significant challenges while focusing on future growth. Despite a challenging year, the declaration of a final dividend signals confidence in the airline’s resilience and commitment to delivering value to shareholders and customers alike. As the airline moves forward, it remains steadfast in its mission to provide a world-class travel experience, even in the face of adversity.