Devaluation Blamed For Fall In Air N,Z. Profit

Press, Volume CVIII, Issue 31801, 4 October 1968, Page 1

Devaluation Blamed For Fall In Air N,Z. Profit

(New Zealand Press Association) WELLINGTON, October 3. Air New Zealand made a net profit of $66,492 in the last financial year, a drop of $370,416 from the previous year’s figure, the company said in its annual report to Parliament today. Devaluation was largely responsible for the reduction.

The airline carried a total of 229,663 passengers over 42,649 miles on its network in 1967-68, and earned a net $13.5m in overseas funds.

The report said the operating profit for the year was $627,606 (total revenue, $26,711,176: expenditure $26,083,570), compared with $664,092 in 1966-67 (revenue, $22,821,902; expenditure, $22,157,810). Interest charges on loan capital amounted to $597,826, from which was deducted interest received on overseas investments of $278,800, to give a net charge against the operating profit of $319,026. This produced a profit before “exceptional and prioryear items” of $308,580. The report said this reflected eight months of operations before devaluation in November of last year, and four months at the new currency levels. “However, the immediate loss in trading to the com-

pany caused by this permanent and unexpected change in the basic exchange rate was $545,000,” the report said. “This charge on the company’s finances has been partially reduced by a recovery of obsolescence amounting to $262,912 related to the sale to an overseas buyer of a jet-prop Electra aircraft.” The net adverse effect was, therefore, $282,088, and this had been offset against the profit of $308,580. “The result is a profit before taxation of $26,492,” the report said. “To this has been added a credit of $40,000 arising from an over-provis-ion for overseas taxation on interest received in a previous year." More Cargo The airline reported that the adverse economy in New Zealand had served as an incentive to increased export activity during the last year and, as a result, the cargo carried on company services increased by 70 per cent. Among primary products exports, 3825 shdrt tons were handled on the network, including 408 tons of fruit and vegetables, 339 tons of fish, and 325 tons of meat. In manufactured products, 445 tons of carpets, 412 tons of electrical equipment, 126 tons of bakery products, and 105 tons of toys and plastic goods were taken overseas.

Referring to the number of passengers carried on the Air New Zealand network, the report said the total fell from

231,709 in 196647 to 229,663 in the last financial year.

The total route miles flown jumped from 36,021 to 42,649 and operating costs, in cents a mile capacity - ton - mile rose from 21,8 cents to 23.8 cents.

The report said: “Air New Zealand has experienced a year in which an unprecedented number of major problems were encountered. But

in spite of these the company has managed to further increase its revenue and, by strict economies and containment of costs, achieved an operating profit comparable with that of the previous year.” Air New Zealand’s gross overseas exchange earnings of s27m for the year were equivalent to the export value of more than half a million lambs or nearly a quarter of a million bales of wool, the airline's chairman of directors, Mr G. N. Roberts, said today. The gross figure was the amount earned before payment of external costs. The net increase rose from $11.2m to $13.4m, and this was of considerable significance. Mr Roberts said it was particularly gratifying for Air New Zealand to achieve a profitable result in a year which had been beset by problems and frustrations which could not have been foreseen.

On the national front, the drive to increase exports had produced new opportunities in air cargo, which were being exploited by the company to the full. The 70 per cent increase in the carriage of air cargo over all company routes was indicative of the airline’s support to the establishment of new markets abroad. “Air New Zealand faced a heavy burden of increasing costs in practically every sphere of expenditure," Mr Roberts said. “While not unique to this airline, the impact was particularly severe when the base national market was restrained as was the case in New Zealand.”