Profit before unusuals and tax for the year ended June 30, 2005, was $235 million compared with $243 million in the previous financial year.

The Board of Air New Zealand has declared a final dividend of 2.5 cents per share, fully imputed, in line with earlier guidance. Total dividend for the year is 5 cents per share, fully imputed.

Managing Director and Chief Executive Officer Ralph Norris said that after excluding record fuel prices and the difficult trading environment on the Tasman, the annual result was among the best in the company's history.

"I believe the company's mettle is better tested in challenging times than in golden years. I am therefore encouraged that even in these tough conditions we achieved a solid profit, which was underpinned by another year of strong domestic performance and improvements in some key international routes," Mr Norris said.

"Nevertheless, as one difficult year ends another perhaps more challenging year begins, largely thanks to record fuel prices and capacity dumping on the Tasman. To ensure that we deliver our shareholders the value they expect it is essential that we continue to remove cost from the business and exit areas that are unprofitable. For example, some parts of the ANZES business are financially under-performing and in order to improve performance a comprehensive review is underway. At the end of this review a consultative process with staff will be undertaken to implement the changes required for improvement."

Liquidity continued to improve in 2005, with closing cash at $1.1 billion dollars, up 5% on the previous financial year.

Gearing improved to 51%, a 5 percentage point improvement and remaining within the Group's medium-to-long term target range of 45% to 55%.

Group operating revenue was up by 3% to $3,616 million.

 

Airline Engineering Services Other Air New Zealand Group
  2005
$m
2004
$m
2005
$m
2004
$m
2005
$m
2004
$m
2005
$m
2004
$m
Operating revenue 3,346 3,216 526 537 155 156 4,027 3,909
Intersegment (411) (411)
  3,616 3,498
EBITDRA 638 610 52 68 7 21 697 699
EBIT 187 180 30 45 (5) 10 212 235


* Intersegment reflects internal transfer pricing

For the first time, Air New Zealand carried more than 11 million customers in one year, up by 781,000.

Group capacity grew five percent during the year, with traffic up seven percent. This was a positive influence on passenger load factor, which increased by one percentage point to 76 percent.

Airline operating cost per available seat kilometre - excluding fuel - reduced by seven percent.

Mr Norris said the financial and operating targets set for FY06 were challenging in today's environment.

"Chief among our concerns is the cost of jet fuel, which at current jet fuel prices represents around 30 percent of our operating costs - up from around 20 percent a year ago. We operate an active jet fuel price hedging programme, with the objective of reducing the volatility in airline costs arising from fuel price movements. In 2005, our hedging programme realised gains of $103 million. Our customers have benefited from these gains, which effectively sheltered them from the full impact of the price rises," he said.

Currently around 60 percent of fuel requirements for 2006 are hedged with the average hedged price for the remainder of the year at around US$53 per barrel (crude oil). For the first half of 2006, the jet fuel position is hedged at 70 percent. However, as hedges roll off and are replaced by higher priced hedges, the operating cost base will increase, impacting margins.

Chairman John Palmer said that if fuel prices persist at current levels, then the potential exists for the current year performance to be around 40 percent below the 2005 result.

"There is no doubt that the times ahead will be tough, but we have proven in the past few years that Air New Zealand has the ability to cope with adversity. I believe that we have the intensity and attitude to see out those tough times. I also firmly believe we have the people and strategies to prosper beyond that.

"We will pursue our objectives of operational excellence, cost control and growing sales with our new product - all of which should help strengthen our position in the airline industry. We will also continue to look for partnerships that can add enduring value to the business."

Meantime, Mr Palmer said the international search for a new Managing Director and Chief Executive Officer was progressing well.

"The Board has made it clear that it is going through a robust process to find the right person to lead the company during its next phase. While the search continues, Chief Financial Officer Rob McDonald will assume the role of acting Chief Executive Officer.

"The decision to appoint Rob to the role on an interim basis is a clear reflection of his ability, and his temporary appointment preserves proper neutrality in the search process between internal and external candidates."

Mr McDonald said that he would not be seeking the role full-time.

"Before the CEO selection process formally commenced, I informed the Board that I did not feel it was the right time for me to take on such a pivotal and demanding role full-time. Nevertheless, I am naturally appreciative of the opportunity to take on the role in an interim capacity before handing over to a new Chief Executive, who will guide the Company through the many challenges and opportunities ahead."

Mr Palmer said that Mr McDonald had the full support of the executive management team, which appreciated the need for the CEO selection process to be fair and robust.


Ends

For further information, please contact General Manager Public Affairs and Group Communications Mike Tod on 64 9 336 3225 or 64 21 747 582 or Corporate Communications Manager David Jamieson on 64 9 336 2253 or 64 21 727 436.

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 www.airnewzealand.com and for more information about Star Alliance visit www.staralliance.com.