Air New Zealand interim net profit down by a third

Air New Zealand says it is well-placed to handle the COVID-19 virus despite a 33 percent fall in first-half net profit due to issues pre-dating the outbreak. The Kiwi carrier's net profit dropped to $NZ101 million after the airline was hit by slower demand growth, weakness in the global cargo market and ongoing unrest in Hong Kong. That translated into an 8.8 percent drop in underlying profit to $NZ198, although operating revenue grew by 3 percent as solid demand on domestic, Pacific island and newly-launched services mitigated weakness in other areas. READ: Air New Zealand unveils revolutionary economy 'sleep pods'. A weaker New Zealand dollar and domestic aviation charges helped push up costs by 3.5 percent and fuel costs were up 1.1 percent due to capacity growth and the impact of foreign exchange. The airline maintained a fully-imputed interim dividend of NZ11 cents and reiterated its recent guidance that the COVID-19 virus would cut earnings by $NZ35 to $NZ75m. It is currently forecasting full-year earnings of $NZ300m to $NZ350m, assuming a $NZ55m "midpoint" impact. Chairman Dame Therese Walsh said the airline's management continued to execute the strategy revealed in 2019 while quickly adapting the business to the evolving situation surrounding the COVID-19 outbreak. “Our capacity discipline on existing routes, stimulation of leisure traffic with the domestic fare restructure and entrance into attractive new international markets has driven good revenue performance in the first half,’’ she said. “Alongside our focus on profitable top-line growth, we are on track to deliver the long-term sustainable cost savings target from our business review initiatives. “While the COVID-19 situation is dynamic, we have taken immediate steps to mitigate the impact of softer demand and I am confident that we have the ability to manage the expected short-term impacts effectively." The airline on February 24 announced it would reduce flying to Asia by 17 percent until June, allowing it to redeploy Boeing 787s, as well as targeted reductions on some Tasman and domestic services. The cuts included the suspension of flights to Shanghai and the new Seoul route as well as reductions in capacity to Hong Kong and Japan. New Chief executive Greg Foran said the recent challenges from the virus outbreak showed the resiliency of the airline and its ability to respond quickly to changing market conditions. “Air New Zealanders from across the business have been working around the clock to manage the impact of the COVID-19 outbreak on our operations,’’ he said. “Our business is resilient, and we have demonstrated the ability time and again to respond quickly to changing market conditions. “We have a highly capable and experienced senior leadership team who have dealt with challenges such as this before and I am confident that we will effectively navigate our way through this.” Foran is conducting a review of the airline in his first 100 days that will provide the basis for any changes to the future strategic direction of the airline. “Air New Zealand holds a special place in the hearts of New Zealanders and we take that responsibility very seriously,’’ he said. “As such, the diagnostic of the airline will look at how we can drive long-term sustainable outcomes for our customers, our staff, the broader community and our shareholders.”