The Net Profit After Tax of $166 million was on a par with the 2003 result.

The Board of Air New Zealand has not declared a dividend but has signalled that it expects to be in a position to be able to do so in the 2005 financial year. On an annual basis, target dividend payout is expected to represent between 25% and 35% of Net Profit After Tax.

A dividend reinvestment plan also will be launched in conjunction with the reinstatement of dividends.

Chief Executive Officer and Managing Director Ralph Norris said the airline closed the 2004 financial year in an improved financial position, with the first phase of the short haul transformation going as planned and the more demanding international airline transformation programme on track.

However, Mr Norris cautioned that 2005 would be another challenging year.

Mr Norris said the 2004 result has benefited from the rise in value of the New Zealand Dollar which was offset in part by a 15% increase in jet fuel prices when compared with the previous financial year.

Operating Cash Flow of $467 million was $56 million lower than the previous period, mainly due to increased income tax payments. Liquidity continued to improve, with closing cash over $1 billion dollars.

Gearing, which has benefited from the favourable exchange rates, has fallen from 62.0% to 52.6%. This is the first time in over five years that gearing has entered the Group's long term target range of 45 to 55%.

Due primarily to the impact of foreign exchange movements, revenue was down on the previous year.

FY04 $million FY03 $million Increase/(decrease) $million % Change
Passenger revenue 2,646.8 2,791.3 (144.5) (5.2)
Cargo and mail 266.3 296.1 (29.7) (10.0)
Contract services* 297.5 306.7 (9.3) (3.0)
Other revenue 287.3 222.5 64.8 29.1
3,497.9 3,616.6 (118.8) (3.3)


* Contract services revenue includes all external revenues earned by ANZES and Airport Services.

Mr Norris said the ongoing transformation of Air New Zealand has drawn upon the special spirit that New Zealanders share.

"The loyalty and belief of our people and our customers has enabled us to make difficult changes as we have improved our efficiency, effectiveness and sharpened our focus on customers," he said.

"We will continue our programme of innovation that has already seen
Air New Zealand redefine operating and competitive opportunities within the airline industry."

Chairman John Palmer said it had never been more important for the airline to be efficient and nimble, as it competed with 19 carriers for customer revenue into and out of New Zealand.

"The competitive future as we envisioned it two years ago is now a reality, and much more. This should come as no surprise, as New Zealand currently has one of the most liberal international air transport policies," Mr Palmer said.

"Competition in this part of the world is intense, creating over capacity and driving down yields. Trans-Tasman is a good example of this with capacity growth of 50 percent over a two year period. This is much greater than our estimates at that time."

Mr Palmer said the swift change of market dynamics on the Tasman, which has seen yields come under intense pressure, had again strengthened the argument for an alliance with Qantas.

"If approved, the alliance will ensure each airline retains its unique identity, independence and autonomy, but at the same time it will allow us to work together to provide a strong platform for growth, boost tourism to both countries, and facilitate joint high-level strategy," he said.

Mr Palmer noted that even with an alliance, the international airline industry is far from a level playing as a result of:

  • Some national carriers used as strategic vehicles for national growth
  • Unequal bargaining power in international "bilateral" operating agreements

"An industry level playing field is still a distant dream," Mr Palmer said.

Operational Review

For the first time, Air New Zealand flew more than 10 million passengers in a single financial year. Group passenger numbers were up 10.4% to 10.7 million when compared with the previous period. Available Seat Kilometres (ASKs) increased 4.3% to 32 billion when compared with the previous financial period. Revenue Passenger Kilometres (RPKs) increased 2.6% to 23.4 billion when compared with the same period in the 2003 financial year. The resulting Load Factor of 73.1% was 1.2 percentage points lower when compared with the previous period.

Group yield declined 7.6% to 11.3 cents. For the short haul sector, yield was 16.1 cents, down 8% when compared with the previous period. On the longer international routes yield of 8.3 cents was 10.3% lower. The reduced yield is largely as a result of currency movements. When currency is held constant, then yield for the short haul was 6.3% lower at 16.4 cents when compared with the previous period. On the longer international routes, currency adjusted yield was only half a percent lower at 9.2 cents when compared with the previous period.

Short Haul (Domestic/Tasman/Pacific)

Passenger numbers grew by 12.6% to 9.1 million. Increased frequency primarily on trans-Tasman and domestic routes resulted in a 9.7% increase in ASKs to 12.6 billion. Similarly, RPKs increased 9.1% to 9.1 billion during the period. The increased traffic can be primarily attributed to increased frequency and demand stimulation, with fares lowered by 20% on average across the short haul network.

Short haul passenger Load Factor was 72.6% for the financial year, similar to the previous period.

Long Haul

The long haul routes, were impacted by the high value of the New Zealand dollar and lower demand for travel from Asia as the market recovered from SARS.

The prolonged impact of SARS on demand for travel resulted in a 1.1 percent reduction in RPKs to 14.3 billion. Passenger numbers remained similar to the previous year at 1.6 million.

The decline in demand for travel as a result of SARS necessitated capacity cut-backs which carried through to the end of the first quarter of this financial year. With capacity restored to pre-SARS levels, ASKs increased by 1.0% to 19.4 billion when compared with the previous period. The resulting Load Factor on these sectors was 1.6 percentage points lower at 73.5%.

Contract Services

Contract Services' revenue is predominantly made up of external revenue from Air New Zealand Engineering Services (ANZES) and Airport Services.

The lower contract services revenue is largely attributable to a decline in ANZES' external revenue, which was impacted by the strong New Zealand dollar.

The combination of the strong currency and aggressive pricing from lower cost Asian engineering and maintance providers will continue to squeeze ANZES' margins. ANZES will undertake a comprehensive review of its operations in order to sustain it's competitiveness in international markets.

Airport Services contributed $73.3 million in external revenue, up $6.5 million on the previous period. This business has benefited from increased ground handling, with a 6.6% rise in weighted landings by external customers, and also increased line maintenance work carried out for third parties.

Cargo and Mail

Air New Zealand's Cargo business was also impacted by the stronger New Zealand currency, with revenue 10% lower than the previous period. Reduced carriage of perishable items from New Zealand and the Pacific Islands, impacted by poor New Zealand weather, the strong New Zealand dollar and reduced seafood catches, contributed to this decline.

Other Revenue

Other revenue increases of 29.1% primarily relates to current year passenger revenue adjustments to accruals that could not be allocated to routes.

NOTE: The content of all Air New Zealand media releases are accurate at the time of issue, as stated at the top of each release. For updates on any changes, please contact Air New Zealand.

Air New Zealand is proud to be a member of Star Alliance. The Star Alliance network was established in 1997 as the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveller. Its acceptance by the market has been recognised by numerous awards, including the Air Transport World Market Leadership Award, Best Airline Alliance by both Business Traveller Magazine and Skytrax. The member airlines are: Adria Airways, Air Canada, Air China, Air New Zealand, ANA, Asiana Airlines, Austrian, Blue1, bmi, Continental Airlines, Croatia Airlines, EGYPTAIR, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shanghai Airlines, Singapore Airlines, South African Airways, Spanair, SWISS, TAP Portugal, Turkish Airlines, THAI, United and US Airways. Aegean Airlines, Air India, Brussels Airlines and TAM have been announced as future members. Overall, the Star Alliance network offers 19,500 daily flights to 1,071 airports in 171 countries.

For more information about Air New Zealand visit and for more information about Star Alliance visit