Neha Jain: http://newzealandaviationnews.blogspot.com//23

1. FAA Environmental Initiative Advances

FAA announced that the Asia and Pacific Initiative to Reduce Emissions (ASPIRE), a partnership with FAA's counterparts and airlines in Australia, New Zealand, Japan and Singapore to reduce aviation's impact on the environment, is moving beyond the demonstration stage with the launch of ASPIRE-Daily service in selected Pacific markets.

Air New Zealand was scheduled to begin ASPIRE-Daily service from Auckland to San Francisco on Feb. 21, using some of the flight procedures identified by the ASPIRE partners to help reduce fuel burn and carbon emissions.

"This is another significant step in our rollout of the Next Generation Air Transportation System," said FAA Administrator Randy Babbitt. "We're beginning to bring the green benefits of NextGen to the airlines and passengers in the Pacific on a daily basis." Over the next four months, other carriers are expected to join Air New Zealand in flying ASPIRE-Daily routes between additional city pairs, FAA said.

Airlines flying ASPIRE-Daily routes must be equipped with advanced avionics that allow them to use at least four of the environmentally friendly procedures per flight outlined in the ASPIRE program. These include the satellite-based Required Navigation Performance avionics, which automatically update an aircraft's precise position to air traffic controllers and provide an on-board system to monitor navigation performance. Another satellite-based system in use is the Future Air Navigation System, which transmits communications data directly from pilots to controllers.

2. Virgin Blue half yearly profit drop in line with forecast

Virgin Blue Holdings Limited has reported an underlying net profit before tax of $72 million, down almost 63 per cent, while posting a net profit after tax of $24 million (down 8.5 per cent), for the half year ending December 31.
The company says the underlying and net profit results were in line with guidance it announced to the market on January 25. VB’s revenue increased 11.8 per cent to $1.69 billion over the previous half year.
Virgin Blue CEO and managing director John Borghetti said the results demonstrated “the core Virgin Blue business is sound”, taking into account the current spate of changes affecting the airline. This includes a number of codeshare deals and strategic alliances with Etihad, Air New Zealand and Skywest airlines.
“This is a very solid result considering the impact of a number of significant one-off factors, including the Navitaire IT system outage, restructuring costs and unusually severe environmental events in Australia and New Zealand,” Borghetti said, noting that last year’s October Navitaire outage had an estimated pre-tax profit impact of $15-20 million.
A further blow came as Virgin Blue issued a full year profit downgrade on January 26, blaming the impact of the Queensland floods and a slowdown in consumer spending for slicing an expected $40 million in revenue for the current financial year.
“That being said, we have seen yield improvements in both short and long haul, with long haul in particular seeing a strong increase,” Borghetti noted. “With a $17 million improvement in its operating position during the first half, our long haul business is on track for reaching close to breakeven by year end. This follows the cancellation of non-profitable routes, changes to current schedules aimed at profit maximisation and the beginning of the benefits flow through from our international alliance strategy.”
VB’s short haul operations posted earnings before interest and taxes (EBIT) of $102 million, while the “long haul business is on track to reach close to breakeven at the EBIT level for the full financial year”. VB’s cash balance at the end of the half year remained a respectable $772 million, with “funding secured for 90 per cent of all aircraft deliveries scheduled up to the end of FY12.” Those new aircraft deliveries will include 18 recently announced ATR72 turboprop aircraft to service VB’s new strategic alliance with Skywest airlines, and two Airbus A330s. Both aircraft types will start being rolled out by mid 2011.
Borghetti said the operating environment, in particular the lack of growth in consumer discretionary spending and continuing uncertainty in the economic outlook, validated Virgin Blue’s strategy to reposition the Group to capture a larger share of corporate flyers while maintaining a strong presence in the leisure market. “We have continued to invest in our Game Change Program, adding the management skills necessary to take the Group to the next level. In addition, we have gained approvals for our alliances with Etihad and Air New Zealand to enhance our international network and announced a strategic alliance with Skywest covering a codeshare and wet lease turboprop agreement”, he said.
VB predicts a “challenging” outlook for the second half the year, with both domestic and international sectors still in a state of economic recovery after a difficult start to 2011. The airline predicts the major challenge of rebuilding Queensland tourism after the sunshine state’s recent floods and cyclone Yasi to take some time. Fifty per cent of all Virgin Blue flights are scheduled within, into and out of Queensland, meaning the airline’s financial impact from the state’s recent spate of natural disasters is expected to be in the order of $50 million.
In light of this, VB’s domestic capacity growth remains under review and the company retains the option of reducing capacity below the full year forecast of six to eight per cent if required. Rising fuel prices are also expected to impact on passenger fuel surcharges, fare increases and fuel hedging stategies. Borghetti again highlighted Virgin’s ‘Game Change Program’, which is set to be a vital part of the airline’s strategy to respond to “changes in future market conditions and ensure a stable and solid future for the Virgin Blue Group”.
“As we roll out the program, our efforts will be directed toward optimising our domestic network, building an international network of airline partners and diversifying our revenue base by increasing our share of the corporate market,” he added. “We are on track to significantly strengthen our position in both leisure and corporate markets in FY12.”

3. Christchurch earthquake grounds air travellers

TRANSPORT in and around New Zealand was disrupted by the Christchurch earthquake after air traffic control shut down air space.

QANTAS, Virgin Blue and Jestar said they did not have planes on the ground in Christchurch but several en-route aircraft were diverted.

A temporary shut-down of New Zealand air traffic control meant planes in other centres were delayed.

Jetstar diverted a trans-Tasman flight to Hobart and another was diverted to Auckland.

The airline bases four aircraft in Christchurch and has more 100 directly employed staff and contractors in the city.

It said it was progressively contacting the workers.

``We'll work though what we need to do,'' spokesman Simon Westaway said.

``Christchurch Airport is currently closed and we haven't got advice on when it will re-open.''

Mr Westaway said air traffic control restrictions meant Jetstar operations in New Zealand had been grounded but it was hopefully of re-instating some flights later today and was also hopeful of operating trans-Tasman flights to Auckland.

He said the airline would provide full flexibility on refunds, cancellations and changes for affected flights..

Virgin Blue said a Melbourne-Christchurch aircraft was diverted to Auckland and the airline would not be resuming flights to C until it received further information about the runway, infrastructure and electricity at the airport.

Virgin Blue group executive operations Sean Donohue said passengers the affected flight would be accommodated there until the situation was clarified in Christchurch.

Mr. Donohue said passengers holding reservations for travel today and tomorrow were encouraged to go to the Virgin Blue website www.virginblue.com.au for updates and information regarding the airline's flexible travel policies.

Qantas said one flight had been diverted to Wellington and would be returning to Sydney.

A spokesman said a Melbourne-bound flight had departed Auckland and the airline was also intending to operate to the reverse leg later today.

4. Strong Air NZ profit growth predicted

GOOD FLIGHT: Air New Zealand has reported it carried 990,000 passengers in January, up 5.4 per cent on the same month last year.

Air New Zealand is expected to report strong profit improvement for the half year to December tomorrow as more passengers board its planes and yields rise.

But analysts say the second half of the financial year will be tougher because of the recent spike in fuel costs and competition intensifies.

Goldman Sachs JBWere aviation analyst Marcus Curley is picking a normalised profit, which strips out hedging effects, of $110 million, up from $96m for the same time a year earlier.

"That has been driven by good load factor increases, and pretty good yields," Mr Curley said.

But in a tale of two halves, the second six months to June 30 would be more of a struggle because of the sharp increase in the cost of jet fuel in the past two months and the substantial increase in competition from long-haul Asian airlines during the next few months, Mr Curley said.

While passengers numbers were improving, Air New Zealand's fortunes depended on its ability to lift yields and limit cost increases, Mr Curley said.

"There might be a fairly sharp reality check in the next six months."

Forsyth Barr analyst Rob Mercer was more bullish tipping normalised profits to gain 27 per cent to $122m on the back of a 9 per cent increase in revenue and the stronger New Zealand dollar reducing depreciation and rental costs.

Air New Zealand should be able to provide a positive medium-to-long-term outlook as it implemented a new fleet of Boeing 777-300 long-haul and Airbus A320 domestic aircraft, Mr Mercer said.

Earnings in the second half of the financial year would be lower than the first half, "but are set for a substantial increase in 2012 financial year", Mr Mercer said.

The airline would benefit from the Rugby World Cup later this year, the implementation of the strategic alliance with Virgin Blue and higher earnings from its domestic network after the departure of Pacific Blue.

But the benefits would be dampened with rising fuel costs, expected to be up 19 per cent to $522m in the first half and the substantial increase in capacity as the new aircraft entered service.

Air New Zealand has reported it carried 990,000 passengers in January, 5.4 per cent more than for the same month last year and group-wide yields for the financial year to date were up 2.4 per cent.