Air N.Z.’s profit 'truly remarkable’

Press, 18 August 1984, Page 3

Air N.Z.’s profit 'truly remarkable’

By

PATRICIA HERBERT

in Wellington Air New Zealand showed a net profit of $102.4 million in the last financial year, more than three times the amount shown in 1982-1983, according to the company’s annual report for 1984 tabled in Parliament yesterday. The report was hailed by the Minister of Civil Aviation, “Mr Prebble, as “a financial turn-around of huge proportions.” “It is clear that the airline is now a very efficient organisation in strong health and I am delighted with the result,” he said.’“l am also pleased to note that it has been achieved with an improvement in flight frequencies rather than cutbacks in air services.” Mr Prebble said that the net profit was “truly remarkable” given that a net loss of $49 million had been sustained only two years ago and that it. had been achieved at a time when overseas traffic outbound from New Zealand was not at all buoyant and when many airlines throughout the world were still in financial difficulty. Analysing the figures against those of 1982-1983, Air New Zealand’s chief executive, Mr Norman Geary said that revenue had increased $117.5 million or 15.1 per cent to $893.3 million, while the rise in spending had been contained at less than 1 per cent notwithstanding 5 per cent more flying hours. . The operating result had risen “a massive $111.6 million” to produce the first operating profit of five years and at $78.9 million a record figure, he said. He attributed the success to effective marketing, high use of aircraft, sound staff productivity, and a tight control over all costs. Revenue passenger kilometres domestically had risen 11.5 per cent and internationally, 9.4 per cent, said Mr Geary. “The high growth in inland air travel was particularly satisfying and was a direct result of the company’s pricing strategies. A significant number of lowcost off-peak ‘Thrifty’ fares were made on a regular basis and proved very popular,” he said. ’■ In the last three years, Air New Zealand has reduced its staff levels 18.1 per cent and cut out hundreds of jobs but traffic has increased 26 per cent. Mr Geary said that impressive gains had been made in worker productivity “in virtually all areas ol the company” and that, given the growth in business, further redundancies were unlikely. The chairman of Air New Zealand’s board of directors, Mr Bob Owens, said that the company had vindicated in full its plan for a return to full profitability. After four years of operating losses “in a recessed economic environment where there was no whiff of alchemy,” it had emerged at the end of the 1983-1984

year to post record earnings. “Thus over a period of 24 months of intense activity designed to reverse the ebb of the airline’s financial tide, there have been turnarounds of $168.9 million in the operating profit and $151.5 million in the net result,” he said. Not only had the targets for recovery been met but they had in many cases been exceeded; Mr Owens said, and without the benefit of signficant sales of aircraft or buildings. “As a year 1983-1984 will be remembered for the consolidation and refinement of the myriad changes wrought so dramatically in 19821983,” he said. The airline had had to be reshaped and put in a position where it could trade effectively even in a lowgrowth market. It had had to move from a traditionally passive promotional role to one which was active with a strong commercial and profit-oriented philosophy. Mr Owens said that the success was not the product of buoyant demand because traffic growth world-wide had remained considerably below that of the halcyon 1960 s and 1970 s and was likely to remain so. Instead the “excellent revenue growth” had been self-generated and the company was confident enough that it would continue to buy new aircraft so that it could handle the predicted expansion in business. Mr Owens said that when he took up the role of chairman in December, 1981, he had been optimistic that the company could recover rapidly. “Most people doubted my prediction of a return to profitability by December, 1983. They were wrong; so was L” he said. "Consistent profits were, in fact achieved by July 1983, an almost unbelievable turnaround,” said Mr Owens. The Opposition spokesman on civil aviation, Mr George Gair, said that while not surprised he was delighted by the results. “Board, management, and staff can all take a pride in the way in which the airline has, in the short space of two years, achieved a dramatic turn-around in its fortunes from serious loss to healthy profit,” he said. .< . However, even more important was the sense of direction and commitment it was showing in its restructuring programmes. In that respect, it had set “a fine example to many other enterprises and their staffs in this country,” said Mr Gair.