Air New Zealand is to leave “no stone unturned” to revive its loss-making long haul international network. The message came as the carrier’s annual profits dived by 45% as it was hit by the dual effects of the Christchurch and Japan earthquakes.
Profit for the year to June 30 came in at NZ$75 million despite a 7% rise in operating revenue to NZ$4.3 billion. Chief executive Rob Fyfe admitted that the operating conditions in the past six months were cumulatively the most difficult Air New Zealand has faced in the past decade.
“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 resulted in an estimated NZ $70 million negative impact on earnings,” he said.
Fyfe added that the airline’s international long haul network is struggling against the backdrop of high jet fuel prices and a rising Kiwi dollar.
This is stifling inbound tourism demand from key markets like the US and UK, which also continue to experience tough economic conditions post the global financial crisis.
“International markets remain volatile and this has an impact on the demand for New Zealand as a destination,” said Fyfe. “This has seen long haul routes in our network lose more than NZ$1m a week in the first six months of this calendar year.
“No stone will be left unturned as we rigorously review our business model, the routes where our capacity should be deployed, our sales and marketing strategy and alliance partner opportunities. The process of change will start to take place this side of Christmas.”
Air New Zealand cemented alliances with Etihad and Virgin Atlantic during the year. “In the absence of further deterioration in global economic conditions and an escalation in fuel prices we expect a better financial performance in the 2012 financial year,” the airline said.