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Ricky Wilson/Stuff
Air New Zealand has been able to hike its prices as demand for travel returned coming out of the pandemic, while capacity remained constrained.
Tourism companies are set to report a strong rebound in profits this week as the industry bounces back after the pandemic.
National carrier Air New Zealand, campervan company Tourism Holdings, and Auckland International Airport are all expected to report a return to first-half profit on Thursday, following losses last year.
Forsyth Barr head of research Andy Bowley said the past few years had been “extremely tough” for tourism companies with significant losses after the international travel market dried up.
But Air New Zealand and Tourism Holdings were now benefiting from strong demand for travel coming out of the pandemic, at a time when there wasn’t as much capacity.
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“Profitability for those two in particular is going to be very strong,” Bowley said. “In any market where demand is higher than supply, prices rise. It’s just inflationary.
“If they don’t have as many aircraft in the skies, or they don’t have as many campervans in the fleet as they once had, their own costs are lower but they’re making a lot more per campervan or per aircraft seat, and therefore it’s quite beneficial to profitability.
”Anyone that’s booked a flight in recent times will have seen that the amount that they’ve paid is likely to have been substantially higher than what they would have paid in pre-Covid times, and the same applies to campervan rentals.”
Planes are full, cruise ships are arriving and there is strong demand from overseas visitors wanting to visit New Zealand over summer, says Tourism Minister Stuart Nash during a visit to Queenstown. Video first published October 28 2022.
Air New Zealand was the worst hit during the pandemic, because it didn’t have the same flexibility as Tourism Holdings to sell down its fleet to locals while borders were closed to keep the cash coming in, or the same flexibility with its costs as Auckland Airport, Bowley said.
“They’ve been through an extremely challenging period, from record losses to the quick reversal of close to record profits this year.”
While profitability at Air New Zealand and Tourism Holdings had benefited from higher prices, Auckland Airport’s recovery would be slower because its prices were more contracted or regulated, he said.
Bowley noted that the high prices would not last as competition would increase as more planes and campervans became available.
“If demand is in excess of supply then prices rise, but as supply starts to come back, then prices start to fall, assuming no change in demand.”
Forsyth Barr expects Air New Zealand to report a first-half profit of $232 million, compared with a $272m loss in the same period last year. Auckland Airport was expected to post a $59.1m underlying profit, from a $11.5m loss last year. And Tourism Holdings is expected to report a $19.2m profit, from a $4m loss last year.
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