Announcement

FLLYR: AIR: Air NZ announces profit of $374 million, maintains dividend 08:33a.m. 
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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