Air New Zealand blames profit dip on engine issues, fuel

WELLINGTON, New Zealand (AP) — New Zealand's national carrier said Thursday that increased fuel costs and engine problems were the main reasons why its annual profit dropped by more than 30%.

Air New Zealand on Thursday reported a pre-tax profit of 374 million New Zealand dollars ($239 million) for the year ending June 30, compared to NZ$540 million in the previous year.

Annual revenue grew by 5.3% to NZ$5.8 billion.

The airline said it faced a temporary increase in operating costs due to the global problems experienced with certain Rolls-Royce engines used on the Boeing 787 Dreamliner planes. And it said fuel costs were almost NZ$200 million higher than in the previous year.

Chairman Tony Carter said the airline was disappointed it didn't meet the earnings forecast it set at the start of the financial year, but nevertheless achieved a solid result in the face of slowing demand.

"When we first saw signs that demand was slowing, we took immediate steps to review our network, fleet and cost base, to position the airline for success in a lower growth environment," Carter said in a statement. "While we have made progress, this work is still ongoing."

The airline in May announced it was ordering eight new Dreamliner planes with a list price of $2.7 billion, but this time with engines made by GE rather that Rolls-Royce. The airline has plans for some new routes, including starting flights to Seoul, South Korea, in November.

Chief Executive Christopher Luxon announced in June he was stepping down after seven years, as he considered a future in politics.

The company said Thursday that Chief Financial Officer Jeff McDowall would become acting CEO after Luxon leaves on Sept. 25 until a permanent replacement is found. The company said McDowall is not seeking the permanent role himself.

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