Air New Zealand agrees to JV with Air Canada, as profit growth plummets 34 per cent

Sydney, Australia - February 12, 2019: Air New Zealand Boeing 777 front fuselage view.

News that Air New Zealand is pursuing a joint venture with Air Canada has coincided with the kiwi airline’s not-so-positive half-yearly financial results announcement.

According to a statement by Air Canada, the two airlines have finalised a memorandum of understanding to pursue expanding its current alliance arrangement to strategically co-operate in the form of a joint venture.

The JV is subject to Air Canada and Air New Zealand making the necessary filings, obtaining competition and other regulatory approvals and finalising documentation.

John MacLeod, vice president of global sales and alliances at Air Canada, said the tow airlines already have a close partnership, having been codeshare and Star Alliance partners for more than 20 years.

“We look forward to deepening our relationship and optimising our far-reaching trans-Pacific network co-operation, offering our customers a choice of more flights, connections and travel opportunities,” he said.

Air Canada has added new non-stop, seasonal flights between Vancouver and Auckland, which will operate four times weekly on board the carrier’s flagship Boeing 787-8 Dreamliner from 12 December 2019 until the end of March 2020, subject to necessary government approvals.

The JV announcement coincided with Air New Zealand’s half-yearly results announcement, with the airline posting a net profit after tax of $145.7 million for the six months to 31 December 2018 – down a massive 34 per cent on the prior corresponding period.

Air New Zealand’s half-yearly revenue rose 7.1 per cent to $2.8 billion, which was more than offset by a 28 percent increase in fuel price and increased operational costs, the airline noted. Earnings before taxation fell 35 per cent to $202.2 million.

Christopher Luxon, CEO of Air New Zealand, acknowledged the rate of growth in the Kiwi market is slowing from previous years to be more in line with other developed markets.

Accordingly, the airline will be reviewing its network, fleet and cost base to reflect the new environment.

“While we continue to expect solid growth across our key markets including domestic New Zealand, we cannot ignore signals that the rate of growth has slowed somewhat from prior years,” Luxon said.

“We pride ourselves at Air New Zealand on being nimble and able to quickly adjust our business to reflect the changing macro environment, and this time is no different.”


Landing issues

Air New Zealand has suffered a couple of embarrassing landing incidents this month.

The first involved a plane bound for China, which was forced to turn back several hours into the flight after being denied permission to land. Air New Zealand put this incident down to a “technicality”.

Then, last week reported that an Air New Zealand flight from Hamburg had to do a U-turn because it hadn’t been given clearance to fly over Iranian airspace.

The airline said in a statement that it had received assurances by its delivery flight planning agent that the Iranian clearance paperwork would come through during the flight.

“Unfortunately this was not received in time and the decision was made to return to Hamburg,” the statement said.

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