Paul Phelan/CAIRNS
A relatively buoyant round of first half financial results from Air New Zealand(ANZ), Ansett Australia and Qantas has been overshadowed by warnings over Asia-Pacific's economic crisis.
All three carriers announced plans to redeploy capacity elsewhere on their international networks as Asian markets continue to shrink, raising the risk of increased competition and pressure on fares.
ANZ managed to keep its results on course over the first half of its financial year to December, showing a rise in net profits to NZ$82 million ($48 million). Managing director Jim McCrea warns, however, that the results are already beginning to show signs of softening and expects this to continue over the next six months.
The New Zealand group had hoped to end its 1997/8 financial year with profits of NZ$200 million, but McCrea now expects the airline to do no better than the NZ$150 million achieved last year.
Sales revenue on routes to Asia and Japan, which make up around one-fifth of ANZ's airline operations, were down by 11% in the first half and are due to fall further.
ANZ has already dropped its services from New Zealand and Australia to South Korea, substituting an arrangement with Korean Air. The alliance with Singapore Airlines, which began in October, has also allowed ANZ to replace direct services to Bangkok and Bali with a codeshare from Singapore.
The airline says that other markets in Hong Kong, North Asia and Taiwan remain "viable at current levels", despite weaker yields and traffic.
Ansett, which is now 50% owned by ANZ, also put in an improved first half performance, with net profits rising to A$45 million ($18 million) from little above breakeven a year ago. The bulk of the improvement came from the domestic Australian network, with the airline's expanding international services showing a loss of A$27 million.
Services to Kuala Lumpur and Seoul have been suspended, and Ansett warns that it "-may be necessary to review" other routes and frequencies. Services to Shanghai have been stepped up to three a week, and Ansett says that operations to destinations such as Bali and Hong Kong are also performing "in line with expectations".
"We can expect more difficult conditions ahead," says chairman Rod Eddinton, adding that the airline is less than one-third of the way towards the target of a "sustainable" 10% operating margin.
Qantas showed a 10% gain in its first half net profits, but chairman Gary Pemberton again cautions that trading conditions have softened and that the airline's improved performance is expected to slow over the next 12-18 months.
Indonesia, South Korea and Thailand have been the most severely affected, with Hong Kong, Taiwan, Malaysia and Japan suffering less. Pemberton signals that spare capacity will be used to defend strategic routes. "We will continue to do what is necessary to ensure our position in key markets is protected," he says.
In the meantime, Qantas has moved closer to establishing a permanent stronghold in New Zealand's domestic airline market, with the signing of a comprehensive new commercial partnership agreement with Ansett New Zealand, which was excluded from the ANZ deal with Ansett.
The deal positions Ansett NZ as Qantas' prime domestic carrier in New Zealand and strengthens the expectation that Qantas will soon finalise negotiations with News Ltd to acquire the carrier.
Source: Flight International
