Air Pacific expects another tough year.

Officials of Air Pacific, the Fijian airline part owned by Qantas, said last week that its 2005/06 operating profits before tax fell to $F21.5 million, $A16.6 million, from $F35.9 million the previous year and that net profits fell from $F24.5 million to $F14.9 million.

They also confirmed that they are expecting another tough year after high fuel prices, increased competition and a flat tourism market slashed its annual pre-tax profit by 40 per cent, with the airline suffering a 33% increase in its fuel bill, to $F142.5 million, that pushed up fuel as a proportion of expenses from 27% to 34%.

The increases came as tourism to Fiji, the airline’s primary revenue source, fell between January and March as a result of a number factors, including the imposition of a hotel turnover tax, issues related  to Fiji’s stability in the lead-up to the general election and high hotel charges that made Fiji less competitive against competing destinations, generally in Asia.

Air Pacific added that excess seat capacity from low-cost carriers also damaged the result through the introduction of artificially low airfares and lower passenger loads, with the net result being a 2% cent increase in revenues, to $F449.4 million, which was outpaced though by a 5.7% increase in costs, to $F428.9 million.

Declaring a $F17c per share dividend amounting to $F4.4 million the airline said it would retain the balance of the profit to help pay for future aircraft purchases, having ordered five 250-290 seat Boeing 787-9 Dreamliners to fly key routes from Fiji to Australia, New Zealand, North America and Japan, the aircraft offering fuel savings of up to 20 per cent, with a range of up to 16,300km, to replace Air Pacific’s two ageing ex Ansett/Singapore Airlines Boeing 747-400s and a 767-300ER.

Air Pacific’s new chairman, Nilan Patel, said the overall standing of the airline remained healthy, despite the reduced profit, with shareholder equity having risen from $F124 million to $145.5 million and cash flow up from $F187 million to $F2012.9 million.

Mr Patel said, “The fact that Air Pacific remained profitable whilst many airlines have experienced losses was gratifying, but there is obviously disappointment within the company that profits have declined”.

Chief executive John Campbell warned of another tough year, with record fuel prices of up to $US92 a barrel, continuing competitive pressures and falling airfares, adding that Air Pacific would continue to control internal costs and seek further improvements to productivity.

Mr Campbell also commented that it was critical for the tourism industry to work together to recover Fiji’s “value for money” standing.  He said, “Tourism flows to Fiji remain flat and major source markets will require significant promotional activity to recover the previous momentum”.

Report by The Mole

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