Air New Zealand’s yields remain depressed in Jan-2010
Air New Zealand’s yields remained depressed in Jan-2010 despite strong capacity reductions, reversing the yield improvements witnessed in Dec-2009. Group yields fell 10.4% last month year-on-year, or by 6.6% removing the impact of foreign exchange. This compares to year-to-date (seven months to Jan-2010) reductions of 9.8% and 10.2%, respectively. However, these latest contractions come off a very high base (with yield growth peaking in Feb-2009, prior to the last year's spectacular falls).
Air New Zealand handled 1.7% more passengers in Jan-2010 on a systemwide basis, despite the carrier reducing capacity (ASKs) by 9.7%. Demand (measured by RPKs) fell 6.9%, increasing Group load factors by 2.6 ppts.
Short-haul yields were down 6.4% in Jan-2010 (with a year-to-date reduction of 8.8%) - against 2.0% year-on-year yield improvement in Jan-2009. Short-haul passenger numbers were 3.9% higher on a year-on-year basis, despite domestic capacity being maintained and as demand increased 10.7%, resulting in a notable 7.9 ppt load factor improvement. Meanwhile, Tasman/Pacific capacity was slashed by 11.6% and demand (RPKs) fell 7.8%, resulted in the load factor increasing by 3.5 ppts to 82.8%.
Air NZ’s long-haul yields slumped 16.0% (year-to-date international yields are down 13.0%), although this reduction was off strong long-haul yield growth of 20.0% in Jan-2009. Long-haul passenger numbers were down 8.7% last month, with capacity on the Asia/Japan/UK routes reduced by 16.9%. Demand fell 16.7%, resulting in load factors increasing by 0.3 ppts to 84.7%. On North America / UK routes, demand decreased by 3.7% as capacity was reduced by 5.6%, resulting in a 1.8 ppt load factor improvement to 90.8%.
Air New Zealand yield growth: Jul-2008 to Jan-2010
As noted in recent earnings announcements by Qantas and Virgin Blue, the short-term outlook for yields is challenging, as more capacity enters the market and economic growth remains tepid. Likewise, Air New Zealand's yield outlook is weak and the carrier is expected to keep capacity levels tight to trigger higher load factors, and, hopefully, better yields. See related report: Couches, cougars and contraction: Air New Zealand downsizes to survive in the jungle