Air New Zealand's third year of profit growth does not create complacency: 6% growth in FY2015

Air New Zealand reported its third consecutive year of profit growth in the FY to 30-Jun-2014. The contrast is obvious with Qantas, which has announced a massive headline loss of AUD2.8 billion (although an underlying loss which improved considerably on analysts' expectations). But the reality is the three hours that separates Sydney from Auckland also significantly changes market conditions that account for the difference in fortune. Air New Zealand faces no major competitor in its core domestic market while in the long-haul market competition is significantly lower and strong partnerships dominate.

Air New Zealand is not resting on its laurels, with a projected 6% ASK growth in FY2015. Domestic, trans-Tasman and North America growth will be below average, Europe flat, and Asia above average as Air New Zealand resumes Auckland-Singapore flying as part of its approved JV with Singapore Airlines. Aside from the Singapore route, most growth will occur through capacity up-gauging as larger aircraft replace smaller ones, reducing growth risk and hefty route start-up costs.