Air New Zealand shares drop

Air New Zealand chief executive Rob Fyfe has poured cold water on speculation he could take the top job at Telecom. Fyfe last month said he would step down on December 31 this year and today said he would definitely stay at the listed airline until the end of the year. Air New Zealand shares fell to a five week low this morning after high fuel costs and a fall in international passenger numbers sapped earnings, leading to a 61 per cent drop in first half profit. Profit fell to $38 million for the six months ended December 31 from $98 million a year earlier, although sales rose 2.2 per cent to $2.3 billion. Shares in the airline were at 89 cents yesterday and fell about 4 per cent following the announcement, and were down 3.37 per cent to 86 cents at 11am. The board has declared an interim dividend of 2 cents per share. Telecom is on the hunt for a new head since chief executive Paul Reynolds announced last year he would leave the company after its split with network arm Chorus. "The timing's all wrong and in fact I genuinely don't know what I'll do next but I'm not in any dialogue with the Telecom team around that job," Fyfe said. "By the time we go through this process, identify a successor, they may have a notice period if it's not an internal candidate, we've then got a transition period," he said. "One of the things I think the board values is I've built up a very strong network around the globe of contacts that are very valuable to the business, we have to try and transfer those over to a successor." Fyfe is chairman of Star Alliance until the end of the year. "Everything's kind of lined up to support the end of the year so I'm not looking at any job before then." Air New Zealand Chairman John Palmer said the airline had stated Fyfe would be at the company until the end of the year. "I'm making it clear despite some media speculation that that will occur," Palmer said. The company would undertake a global search, had strong internal candidates and the process should be expected take at least six months, Palmer said. "We are in that process already I am not going to give any definite time-line for when that that will be completed but we would expect that certainly nothing before the middle of the year," he said. "This is a very important decision for the board and for the company and we will take whatever time we need to ensure we get the right outcome." Grant Williamson, director at brokers Hamilton Hindin Greene said the airline's bottom line was "disappointing" but it was still a creditable result for an airline when others were still struggling. "I don't see a lot of downside - the market got it right. In mid January the stock was trading around these levels." The government currently owns about 73 per cent of the national carrier and is looking to sell part of that over the next five years, along with four state-owned enterprises. The airline said it is working to improve its market position with a number of initiatives already in place, including job cuts. "We plan to remove 441 roles from the business before the end of the financial year," said Rob Fyfe. "A total of 266 of these roles are being exited through non-replacement of roles or non-renewal of contracts, of which 193 have already been achieved. The removal of the remaining 175 roles will result in redundancies and we begin the consultation process with affected staff this morning." Air NZ is seeking to improve profitability by more than $195 million annually by 2015. Given the 2012 financial year performance to date and the global economic environment, matching last year's result will be a challenge, Fyfe said. The Rugby World Cup did little to offset weakness in the European and Japanese travel markets. The airline plans to focus on in-flight products and services, deployment of the new Boeing Dreamliner and cost cutting, including through alliances such as the partnership with Virgin Blue. It will explore opportunities in South America, Asia and North America, as well deepening its network into China. In its interim report today Air New Zealand announced its first charter flight to South America in September. Domestic capacity has increased 3.2 per cent following the exit of rival Virgin Australia. In the last six months it announced a new service between Auckland and Paraparaumu. Mt Cook is set to become the 28th domestic destination when it trials a new route between Christchurch, Mt Cook and Queenstown next summer.