Announcement

FLLYR: AIR: Air NZ announces profit of $374 million, maintains dividend 08:33am 
AIR
22/08/2019 08:33
FLLYR
PRICE SENSITIVE
REL: 0833 HRS Air New Zealand Limited (NS)

FLLYR: AIR: Air NZ announces profit of $374 million, maintains dividend

Air New Zealand today announced earnings before taxation for the 2019
financial year of $374 million, compared to $540 million in the prior period.
Net profit after taxation was $270 million and operating cash flow was $986
million.

The result was driven by operating revenue growth of 5.3 percent, which was
offset by a $191 million increase in the price of fuel, as well as a
temporary increase in operating costs as the airline sought to improve
network resiliency for its customers in the face of the global Rolls-Royce
engine issues.

Shareholders of Air New Zealand will receive a final dividend of 11.0 cents
per share, taking the total ordinary dividends declared for the year to 22.0
cents per share, in-line with the prior year. The dividend will be paid on 18
September, to shareholders on record as at 6 September.

Chairman Tony Carter said the result represents the relentless focus and hard
work of more than 12,500 Air New Zealanders, who have risen to the challenges
this financial year has presented.

"While we are disappointed that we did not meet the expectations we first set
for ourselves at the start of the financial year, the fact is we are
operating in a different demand environment than we were 12 months ago. To
have achieved a solid result despite these headwinds speaks volumes about the
extraordinary dedication and commitment of our people.

"When we first saw signs that demand was slowing, we took immediate steps to
review our network, fleet and cost base, to position the airline for success
in a lower growth environment. While we have made progress, this work is
still ongoing.
"I am very confident in our strategy and our experienced, world-class
executive team who are focused on driving our business back to earnings
growth, while ensuring that we maintain the airline's strong customer-centric
culture."

Chief Executive Officer Christopher Luxon noted that as the airline navigates
a more challenging demand environment, delivering competitive fares and a
superior customer experience remain a top priority.

"While the New Zealand market has seen foreign competitors reduce capacity or
withdraw completely this year, we have continued to grow both domestically
and internationally and to adjust our domestic fare structure to keep New
Zealanders connected to each other and the world.

"In a society with rapidly changing customer expectations, we know we need to
continue to lift our game. We invest a huge amount of time understanding what
our customers value and how we can improve their experience, which is why we
introduced free Wi-Fi onboard our long-haul flights earlier this year and
announced changes to our Economy product offering. We can't wait to share
some further exciting product developments and enhancements in the coming
months, which we think our customers are going to love."

Mr Luxon went on to say that as the airline looks to the coming year, it is
in a fundamentally strong position and will target further growth that taps
into new pools of demand.

"We were very excited earlier in the year to announce that we would begin
flying to Seoul in November 2019. A new seasonal service from Christchurch to
Singapore will begin in December 2019, which will provide greater choice for
visitors and locals alike.We will also launch additional frequency into both
Chicago and Taipei, as these routes continue to outperform our expectations.

"Another important milestone will be the return of our remaining Rolls-Royce
engines back into service, which we are expecting to happen in the coming
months. This will enable us to bring further reliability back to our flying
schedule and to utilise our most efficient aircraft in the optimum way."

Mr Luxon acknowledged that while the outcomes of the business review
announced in March will provide some clear benefits to the airline in the
coming year, there were still further cost efficiencies that needed to be
realised following the conclusion of operational and overhead cost reviews.

"We are focused on ensuring that Air New Zealand is fit for the new lower
growth environment and part of that involves identifying ways that we can
deliver meaningful, sustainable reductions in our cost base. We know we
already run a tight ship and that any further cost savings will require
exponential effort.

"That is why we have selected a respected external consultancy to assist with
this process. They can provide us with an outside perspective and are able to
benchmark us to provide a clear understanding of how our processes compare
with global peers."

Mr Luxon also stated that the airline remains committed to delivering on its
sustainability strategy and initiatives.

"We know that sustainability is a critical global issue and we risk losing
our social license to operate if we do not genuinely address climate change.
That is why you will see us continue to invest, whether that be further
reducing single use plastic items on board our aircraft or making it easier
for our customers to voluntarily offset their emissions with our FlyNeutral
tool."

The airline will also take delivery of six ATR aircraft and three Airbus
A320/321 NEO aircraft in the 2020 financial year, which will provide
continued growth, fuel efficiency and cost benefits on the Tasman and Pacific
Islands network. An additional Boeing 787-9 Dreamliner will also join the
fleet this year.

Air New Zealand's investment grade credit rating and strong operating cash
flow have enabled it to continue to invest in the most innovative, efficient
and comfortable aircraft on the market to deliver on its commitment to grow
sustainably. Earlier this year the airline announced that it would replace
its fleet of Boeing 777-200 aircraft with the Boeing 787-10 Dreamliner,
subject to shareholder approval in September. These aircraft will start to be
delivered from the 2023 financial year and will be a game changer for the
airline, offering a 25 percent improvement in fuel efficiency.

Outlook
Based upon current market conditions and assuming an average jet fuel price
of US$75 per barrel, the airline is targeting earnings before taxation to be
in the range of $350 million to $450 million. This outlook excludes the
impact of the new accounting standard for leases.

Financial Highlights
o Operating revenue of $5.8 billion
o Earnings before taxation of $374 million
o Net profit after taxation of $270 million
o Operating cash flow of $986 million
o Fully imputed final dividend of 11.0 cents per share, resulting in annual
ordinary dividends of 22.0 cents per share

Ends
Issued by Air New Zealand Public Affairs ph +64 21 747 320
End CA:00339567 For:AIR Type:FLLYR Time:2019-08-22 08:33:41

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