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Air New Zealand more upbeat about future

NZN 22/02/2017 Rebecca Howard

Air New Zealand expects revenues to improve over the second half and into the following financial year as competition shows signs of stabilising.

"We do believe we are at the high water tide mark in terms of new competitors coming into the market place," chief executive Christopher Luxon said on a conference call for investors and analysts after the company reported a 24 per cent slide in first-half pre-tax profit to $349 million, largely due to new competition.

The airline is targeting 2017 earnings before taxation to be in the range of $475m-to-$525m, including a $22m gain from the divestment of its remaining interest in Virgin Australia. Earnings before taxation were $806m in the prior period, a rise of 70 per cent as it benefited from a massive tourism boom and low oil prices.

While tourism numbers continue to hit record highs, eight new carriers began flying to the New Zealand market in the first half, putting significant pressure on the national carrier, said Mr Luxon.

Some of them, however, such as China Southern and China Eastern, are now decreasing the number of services which is creating "pockets of optimism," he said.

"Despite the tough environment in Asia there are encouraging signals," Mr Luxon said. "Some Chinese carriers appear to be taking steps to reduce frequency to New Zealand in our low season and this has the potential to help our international long haul passenger rask (revenue per available seat kilometre)". United Airlines has also made downward capacity adjustments, he said.

Regarding domestic competition, Mr Luxon downplayed any concerns about increased capacity from airlines like Qantas's Jetstar. "We are very, very confident about our position in domestic New Zealand," he said.

He noted that Air New Zealand increased its capacity into Queenstown by 25 per cent and strong inbound tourism and hefty domestic demand has meant the seats have been filled. He expects domestic rask to fare well in the second half, in particular due to a series of events such as the Masters Games and Lions Rugby Tour.

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