Results day 1: Air New Zealand, Qantas and REX
Here’s a brief summary of yesterday’s annual results releases:
Air New Zealand
The day started with the flag carrier carrier at the very end of the world announcing it’s best annual result for five years with a underlying pre-tax profit of NZ$256 million, a statutory profit of NZ$183 million a 156 per cent increase on FY2011/12. This was on a slight three per cent increase in revenue to NZ$4.618 billion.
This strong result was supported by ANZ’s strongest load factor results in five years of 83.6 per cent. This was an increase of .8% over last year and came even as the airline grew Available Seat Kilometre (ASK) capacity by 1.7 per cent across its network.
Strongest passenger demand was in the Tasman/Pacific region with a passenger revenue increase of 5.1 per cent. The Seats to Suit fare structure and strategy to attract a range of market segments in the same aircraft is clearly paying dividends for the airline. While overall yield/Revenue Passenger Kilometres (RPK) remained almost constant with last year, the carrier faces continued yield pressure domestically offsetting its much improved long-haul results.
Over the coming three years ANZ will invest NZ$1.8 billion in new fleet equipment, comprising two 777-300ERs, six 787-9s, nine A320s and four ATR 72s. In the same time the airline’s remaning B747-400s and B767-300ERs will be retired from the fleet.
The Qantas Group
Group revenue remained almost flat at AUD$15.9 billion. Importantly the group is now free cash flow positive; return on capital improved to 4.7% but remains below cost of capital.
Qantas Domestic’s profit declined 21 per cent to $365 million, but maintained its ‘profit-maximising’ 65% domestic market share. This is still a strong result given a $100 million carbon tax charge, and yield pressure from a 5.1% growth in ASK capacity (8% according to Qantas) when domestic RPKs increased only 1.9%. The group has retained an 84% share of the corporate market.
Qantas Loyalty’s EBIT grew to $260 million, on growth of its membership base to 9.4 million members. Making it the most profitable airline loyalty programme in the world.
Freight too, reported a profit reduction of 20 per cent to $36 million, impacted by tough conditions in air cargo market.
International halved it’s previous financial year loss to $246 million.
“We are two years into our five-year turnaround for Qantas International – and we are on track towards our target of a return to profit in FY15.” Group CEO, Alan Joyce.
In addition to the Qantas-Emirates partnership, services eastward to the Americas continue to perform well with Joyce noting “we see good prospects for our partnerships with American Airlines and LATAM in those markets. ”
Jetstar earnings were also down, reporting an EBIT of $138 million, 32 per cent lower than FY13. This result was impacted yield pressure in the domestic market and start-up costs associated with Jetstar Japan and Jetstar Hong Kong.
The group too, will sell Qantas Defence Services (QDS) to Northrop Grumman Australia for AUD$80 million. QDS is an aircraft and engine engineering provider to government and military customers. This continues the group’s trend of divesting non-core assets, re-investing the capital back into core areas of the business. The last B737-400s and a further two B747-400s will be retired in FY14.
REX Regional Express
Australia’s largest independent regional airline, was the last to release, coming out on the attack with all its SAABs firmly pointed at a Federal Government ‘hell bent’ on destroying regional aviation is full responsible for its 21 per cent decline pre-tax profit to AUD$21 million.
Softer demand led to REX’s passenger numbers declining by 6.8%. A result of increases in ticket prices driven primarily by the impact of the carbon tax, and aviation security charges at regional airports.
“This would ordinarily be grounds for much jubilation but instead we at Rex are all too painfully aware that this pole position is an aberration arising from one of the most toxic environments ever to face aviation in Australia.” Executive Chairman, Lim Kim Ha
REX will invest more than $50 million dollars across the business in the coming financial year to better improve the airline’s competitive position in all market segments.
Now it’s time for Virgin Australia…