Thursday, August 29, 2024 Air New Zealand has reported its financial results for the 2024 fiscal year, with earnings before taxation amounting to $222 million. This marks a significant decrease from the previous year’s $574 million, a decline that was anticipated following the extraordinary financial performance in 2023, when New Zealand’s border reopening bolstered the airline’s earnings. The net profit after taxation for 2024 stands at $146 million.
The airline experienced a solid first half of the financial year; however, the latter half presented increasing challenges due to a combination of operational and economic headwinds. The economic climate in New Zealand, particularly a weaker domestic demand, notably impacted the corporate and government travel sectors, contributing to the overall financial downturn. Operational difficulties further compounded these challenges.
Accelerated maintenance demands for Pratt & Whitney PW1100 engines led to up to six of Air New Zealand’s Airbus neo aircraft being grounded at various times. Similarly, additional maintenance needs for the Trent 1000 engines, which power the Boeing 787 Dreamliner fleet, resulted in up to three Dreamliners being out of service at any given time. These operational disruptions, alongside fierce competition from US carriers and the ongoing effects of high inflation, significantly affected the airline’s performance in 2024.
Despite these challenges, Air New Zealand saw an 11 percent increase in passenger revenue, reaching $5.9 billion, driven by a 23 percent expansion in capacity, particularly in the international long-haul sector. However, this growth was offset by weakened demand and heightened competition.
Included in the passenger revenue was $90 million attributed to unredeemed customer credits. While average jet fuel prices were slightly lower this year, total fuel costs rose by approximately $190 million, largely due to network expansion. Additionally, non-fuel operating costs outpaced revenue growth, driven by increased capacity and widespread inflation.
Non-fuel cost inflation, which amounted to around $225 million, has been a considerable drag on the airline’s financial performance. Increases in landing charges, air navigation fees, and engineering materials led to a six percent rise in non-fuel operating costs, bringing the cumulative impact of inflation over the past five years to between 20 and 25 percent. Despite network growth providing some scale benefits, productivity remains below pre-Covid levels due to persistent supply chain disruptions.
In light of the airline’s balance sheet strength and the reported results, shareholders will receive a final unimputed ordinary dividend of 1.5 cents per share, bringing the total ordinary dividends for the year to 3.5 cents per share.
The dividend is set to be paid on 26 September, with the record date being 13 September. Chair Dame Therese Walsh expressed her gratitude for the dedication and hard work of the 11,700 Air New Zealand employees who have navigated the numerous challenges the airline has faced this year. “It’s been a difficult year managing both macroeconomic and operational challenges.
I’d like to thank the Air New Zealand whānau, not only for navigating these issues with great skill and manaaki, but also for never losing sight of what the organisation needs to do to be a future-fit airline. “We know these challenges will pass, some faster than others, but they have had a significant impact on our financial performance this year. Today we announced earnings before taxation of $222 million and estimate earnings would have been around $100 million higher, net of compensation, had we been able to operate our aircraft and schedule as intended.
” Dame Therese Walsh emphasized that while Air New Zealand faces short-term challenges, the airline remains steadfast in its pursuit of long-term opportunities to enhance financial returns. She affirmed that the company is committed to upholding its core values and continuing to deliver a world-class travel experience for its customers. Despite the current obstacles, Air New Zealand is focused on strategies that align with its culture and mission, ensuring that customer satisfaction remains at the forefront of its operations.
“Our balance sheet is robust, with capacity to prudently manage these headwinds while investing sensibly in the areas that matter for our people and our customers. We believe in the strength of our plan and our team and are excited about the opportunities ahead as we move out of this current cycle.” Amid significant external disruptions, Chief Executive Officer Greg Foran extended his gratitude to both customers and Air New Zealand employees for their unwavering support.
He acknowledged the resilience and commitment shown by the airline’s community during these challenging times, emphasizing that their ongoing loyalty has been crucial as the airline navigates through a complex and demanding environment. “I want to acknowledge the understanding and loyalty of our customers who were 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.
“We took immediate action to minimise the disruption, leasing three Boeing 777-300ERs, securing additional spare engines and adjusting our network and schedule to deliver greater reliability. We are very proud of what our team managed to achieve, but we know it has been far from perfect for impacted customers. “The challenges we are facing are not unique to Air New Zealand.
Supply chain and aircraft delivery delays, growing costs and a shortage of labour in key areas like engineering are major issues facing many airlines across the global aviation industry. However, the reality is that while these issues continue to play out, Air New Zealand is expecting a challenging year ahead.” Mr Foran went on to say that Air New Zealand was fundamentally well-positioned and would not let the current environment distract the airline from delivering on its purpose.
“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. Our Kia Mau strategy continues to serve us well, driving improvements in our core capabilities, and we’ve made considerable progress on many fronts. “A key priority for us continues to be delivering excellent customer service and a range of competitive fares.
This requires ongoing discipline around our cost base, and you will see us make targeted adjustments, including around a 2 percent reduction in headcount, as well as pursuing improvements in the controllable cost base. “We remain committed to investing for the future, with expected aircraft-related capital expenditure of $3.2 billion over the next five years.
This includes a significant, multi-year interior retrofit programme on our 14 existing Dreamliner aircraft. We anticipate delivery of the first new GE-powered Boeing 787-9 aircraft towards the end of the 2025 calendar year, which will provide options for continued growth, cost efficiencies and network expansion opportunities.” Mr Foran went on to conclude that the airline is focused on operating effectively through the current economic and operating conditions, which are expected to continue through the first half of the 2025 financial year.
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