Earthquakes hit Air New Zealand long-haul numbers; short-haul yields remain weak


Air New Zealand stated the Christchurch and Japan earthquakes significantly hit its long-haul passenger numbers in May-2011, as has been the case in the preceding few months. While the carrier's long-haul business is struggling, it continues to grow traffic in the domestic and short-haul international market. Short-haul yields were weaker in May-2011, compared with 2009 and 2008, due partly to the carrier's new "seats to suit" product, while long-haul and group-wide yields have now increased on a year-on-year basis and are above 2009 levels.

  • Air New Zealand's long-haul passenger numbers declined by 9.3% in May 2011, primarily due to the impact of earthquakes in Christchurch and Japan.
  • Short-haul international yields were weaker in May 2011 compared to previous years, partly due to the introduction of the carrier's new "seats to suit" product.
  • Long-haul and group-wide yields have increased on a year-on-year basis and are above 2009 levels.
  • The reduced long-haul passenger numbers were accompanied by significant capacity cutbacks on international services, resulting in improved load factors.
  • Overall, Air New Zealand's passenger numbers increased by 1% in May 2011 compared to the previous year, but are weaker than in March 2008.
  • Domestic passenger numbers have been growing for the past 11 months, with a 2.1% increase in May 2011, driven by a 3.4% increase in domestic traffic.

Air New Zealand short and long-haul yield growth: Jul-2008 to May-2011

Air New Zealand Group yield growth: Jul-2008 to May-2011

Long-haul passengers slump 9.3% in May-2011

Meanwhile, the carrier's long-haul business is showing signs of struggling. Long-haul passenger numbers declined 9.3% year-on-year in May-2011 to 98,000, driven by a 12.0% decline on Asia/Japan/UK services to 37,000 passengers and a 7.6% weakening in passenger numbers on North America/UK routes to 61,000. Long-haul passenger numbers were not only weaker than 2010 levels, but lower than in May-2009 (109,000 passengers), May-208 (204,000), May-2007 (180,000) and May-2006 (102,000) levels.

Air New Zealand passenger numbers (long-haul) (2009 to 2011)

Air New Zealand passenger numbers (long-haul, Asia/Japan/UK) (2009 to 2011)

Air New Zealand passenger numbers (long-haul, North America/UK) (2009 to 2011)

The reduced number of passenger numbers correlated to considerable capacity cutbacks on international services, with long-haul capacity (ASKs) down 9.4% in the month. Long-haul load factors improved by 1.5 ppts to 78.1%, as the capacity reductions exceeded the 7.6% decline in traffic (RPKs) levels.

Air New Zealand Revenue Passenger Kilometres (long-haul) (2009 to 2011)

Air New Zealand Available Seat Kilometres (long-haul) (2009 to 2011)

Passenger numbers improve on a year-on-year basis

During May-2011, Air New Zealand Group handled 892,000 passengers, a 1% year-on-year increase and a 4.9% increase from May-2009 levels. Passenger numbers are 5.5% weaker than in Mar-2008.

Air New Zealand Passenger Numbers (2009 to 2011)

Overall Air New Zealand traffic (RPKs) declined 2.8% in Mar-2011, outpaced by a 3.9% decline in capacity (ASKs). Capacity levels in the past two months have been lower than both 2010 and 2009 levels. Capacity levels have been weaker than 2009 levels throughout the whole of 2010 and the first five months of this year.

Air New Zealand Available Seat Kilometres (2009 to 2011)

Load factors strengthen

As a result, Air New Zealand reported load factor growth of 0.9 ppts in May-2011 to 78.5%. Load factors have improved year-on-year every month since May-2010, with the exception of Mar-2011. Looking closer at May load factor data, the May-2011 result, while only slightly higher than 2010 levels, marks the highest load factors for May back to until least 2006, when load factors stood at 76.7%. (May-2006: 66.8%; May -2007: 72.4%; May-2008: 73.5%; May-2009: 76.0%).

Air New Zealand Passenger Load Factor (2009 to 2011)

Domestic passenger numbers up for past 11 months

In the domestic market, Air New Zealand is continuing to grow traffic. Domestic passenger numbers have improved on a year-on-year basis for the past 11 months, with growth of 2.1% to 609,000 passengers and in line with traffic (RPKs) and capacity (ASKs) trends. Domestic traffic (RPKs) increased 3.4% on a 4.9% capacity increase, resulting in a 1.1 ppt load factor reduction to 79.0%.

Air New Zealand Passenger Numbers (Short-haul, Domestic) (2009 to 2011)

Some 70% of the carrier's capacity is allocated to the domestic market, according to Innovata. The carrier has an extensive domestic network and is the sole operator on numerous regional sectors.

Air New Zealand international vs domestic capacity share (27-Jun-2011 to 03-Jul-2011)

Air New Zealand won't make money in 1HFY2011

Air New Zealand CEO Rob Fyfe earlier this month stated the carrier "won't make money" in the six months to 30-Jun-2011 although services will be full during the Rugby World Cup.

Mr Fyfe, in an interview with Bloomberg TV, stated the period from Jan-2011 to Jun-2011 was "the toughest half-year I've experienced since I came into this role", with the carrier seriously affected by the earthquakes in Christchurch, the earthquake and tsunami in Japan and the floods in Queensland.

Air New Zealand reported a 75% jump in half-year net profit in the six months ended 31-Dec-2010 on improved passenger numbers, one-off gains, improved yields and lower costs. However, the carrier has cautioned over the significant impact of the Mar-2011 earthquake in Christchurch.

Air New Zealand, in Mar-2011, stated its full year pre-tax profit could be NZD50 million-60 million (USD37-44 million) below forecasts. The carrier, which had prior to the earthquake expected to be profitable in the six months to Jun-2011, has forecast that full-year normalised earnings are now expected to fall below NZD100 million (USD74 million).

APPENDIX: Air New Zealand May-2011 operating statistics

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