Joined: 24 Dec 2006
|Posted: Tue Jan 23, 2007 10:13 pm Post subject: Fyfe: ANZ has 'long, long way to go'
|Monday January 22, 2007
Air New Zealand played down suggestions that the challenges facing the airline are over even as receding fuel prices are prompting a share price rally.
In the past five months, ANZ's shares have climbed from NZ$1.20 ($0.82) to just above NZ$2, with some analysts suggesting it will triple its profit over the next four years. But CEO Rob Fyfe warned the carrier is far from where it needs to be. "The improving profit picture is deceiving. We have a long, long way to go before we will be performing as a normal business," he told ATWOnline.
Fyfe said the airline industry is way behind others when it comes to EBIT as a percent of revenue. "ANZ had an EBIT of 4% last year compared to Auckland International Airport Ltd. with 60% and [telecom giant] Telstra with 39%. If we were to make the same EBIT percent as Auckland Airport we would need to post a result of NZ$2.5 billion instead of $150 million." He added that ANZ's return on equity is barely 6%; "The money would be better in a bank."
ANZ's restructuring is only 30% complete, Fyfe said. "We have another three years to go, without any major upheavals, before we will have a good business. We have the right product but the challenge is to now grow the revenue."
The carrier will attempt to do so on the domestic front through a fare reduction, lowering fares by 26% on Jan. 24 for flights from Feb. 24. The cheapest one-way fare between Auckland and Wellington will drop from NZ$115 to NZ$89, for example. Fyfe told this website that he expects the move "to generate more demand for travel on the Air New Zealand domestic network." The price reductions are part of a major push to grow the business now that many key restructuring elements are in place.
ANZ recently completed an upgrade of its eight 400-seat 747-400s and soon will take delivery of the last of eight 300-seat 777-200ERs. It is mulling an order for the 385-seat 777-300ER. In December it ordered more 787s (ATWOnline, Dec. 20, 2006), taking its commitment to eight. It has another 36 options for either 777s or 787s.
by Geoffrey Thomas