Air New Zealand 2016 Annual Report Download

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ANNUAL
FINANCIAL
RESULTS
2016

Table of contents

  • Page 1
    FINANCIAL RESULTS ANNUAL 2016

  • Page 2
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016

  • Page 3
    ...Shareholder Statistics Operating Fleet Statistics General Information Shareholder Directory 40 44 48 53 55 56 57 57 58 59 62 64 65 67 *This document, in conjunction with the Air New Zealand Annual Shareholder Review 2016, constitutes the 2016 Annual Report to shareholders of Air New Zealand Limited...

  • Page 4
    ... RESULTS 2016 Statement of Financial Performance For the year to 30 June 2016 2016 $M 2015 $M NOTES Operating Revenue Passenger revenue Cargo Contract services Other revenue 1 Operating Expenditure Labour Fuel Maintenance Aircraft operations Passenger services Sales and marketing Foreign exchange...

  • Page 5
    AIR NEW ZEALAND GROUP Statement of Comprehensive Income For the year to 30 June 2016 2016 $M 2015 $M NOTE Net Profit for the Year Other Comprehensive Income: Items that will not be reclassified to profit or loss: Changes in fair value of investment in quoted equity instruments Actuarial (losses)/...

  • Page 6
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Statement of Changes in Equity For the year to 30 June 2016 INVESTMENT REVALUATION RESERVE $M FOREIGN CURRENCY TRANSLATION RESERVE $M NOTES SHARE CAPITAL $M HEDGE RESERVES $M GENERAL RESERVES $M TOTAL EQUITY $M Balance as at 1 July 2015 Net profit...

  • Page 7
    AIR NEW ZEALAND GROUP Statement of Financial Position As at 30 June 2016 2016 $M 2015 $M NOTES Current Assets Bank and short-term deposits Trade and other receivables Inventories Derivative financial assets Investment in quoted equity instruments Other assets Total Current Assets Non-Current ...

  • Page 8
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Statement of Cash Flows For the year to 30 June 2016 2016 $M 2015 $M NOTES Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Income tax paid Interest paid Interest received Rollover of foreign exchange ...

  • Page 9
    ...The parent company, Air New Zealand Limited, is a profit-oriented entity, domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand and Australian Stock Exchanges. Air New Zealand Limited is a FMC Reporting Entity under the Financial Markets Conduct Act 2013 and...

  • Page 10
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Statement of Accounting Policies (continued) For the year to 30 June 2016 Disclosure Initiative (Amendments to IAS 7) has not been adopted early. This amendment requires new disclosures of changes in liabilities arising from financing activities, ...

  • Page 11
    ... New Zealand. Resource allocation decisions across the network are made to optimise the consolidated Group's financial result. 2016 $M 2015 $M Analysis of revenue by geographical region of original sale New Zealand Australia and Pacific Islands United Kingdom and Europe Asia America Total operating...

  • Page 12
    ... States made in respect of allegations of anti-competitive conduct against many airlines for pricing in the air cargo business. Air New Zealand does not admit to being part of the alleged conspiracy. The settlement was reached due to the deemed unacceptable risk on the Group's financial position...

  • Page 13
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) For the year to and as at 30 June 2016 4. Taxation (continued) 2016 $M 2015 $M Current taxation expense Current year Adjustment for prior periods Deferred taxation expense Origination of temporary differences Total taxation ...

  • Page 14
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) For the year to and as at 30 June 2016 5. Earnings per Share Basic earnings per share is calculated by dividing the profit attributable to shareholders of the company by the weighted average number of ...

  • Page 15
    ... income. 2016 $M 2015 $M Investment in Virgin Australia Holdings Limited: Current Balance at the beginning of the year Transfer from investments in associates Fair value changes recognised in profit or loss Disposals Balance at the end of the year Further details of the Group's investment...

  • Page 16
    ... three years. The carrying value of the assets held for resale reflects the lower of their previous carrying value at the date of transfer or external market assessments of the fair value, less costs to sell. The Group operates two defined benefit plans for qualifying employees in New Zealand and...

  • Page 17
    ... years 2 - 10 years AIRFRAMES, ENGINES AND SIMULATORS $M SPARES $M PLANT AND EQUIPMENT $M LAND AND BUILDINGS $M CAPITAL WORK IN PROGRESS $M TOTAL $M 2016 Carrying value as at 1 July 2015 Additions Disposals Depreciation Impairment Transfers Transfer to assets held for resale Foreign exchange...

  • Page 18
    ... business. Cash flow projections were sourced from the 2017 financial year plan and extrapolated into the future using a 2% growth rate. Key assumptions include exchange rates, customer demand, market supply and terminal values. These assumptions have been based on historical data and current market...

  • Page 19
    ...over their estimated useful lives of three to six years. INTERNALLY DEVELOPED SOFTWARE $M EXTERNALLY PURCHASED SOFTWARE $M CAPITAL WORK IN PROGRESS $M OTHER $M TOTAL $M 2016 Carrying value as at 1 July 2015 Additions Amortisation Transfers Carrying value as at 30 June 2016 Represented by: Cost...

  • Page 20
    ... Air Nelson Limited Air New Zealand Aircraft Holdings Limited Air New Zealand Associated Companies Limited Air New Zealand Regional Maintenance Limited Eagle Airways Limited Mount Cook Airline Limited TEAL Insurance Limited Aviation Aircraft leasing and financing Investment Engineering services...

  • Page 21
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 13. Investment in Other Entities (continued) Summary financial information of associates VIRGIN AUSTRALIA 2015 $M CEC 2016 $M TOTAL 2016 $M CEC 2015 $M TOTAL 2015 $M Assets and liabilities of associates* are...

  • Page 22
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 14. Revenue in Advance Transportation sales in advance includes consideration received in respect of passenger and cargo sales for which the actual carriage has not yet been performed. ...

  • Page 23
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 15. Interest-Bearing Liabilities (continued) Finance lease liabilities Payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance ...

  • Page 24
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 16. Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will...

  • Page 25
    ...282 4 2,286 * During the year ended 30 June 2016 the Group funded the purchase on-market of 13,181,727 shares (30 June 2015: Nil). The shares were used to settle obligations under employee share-based compensation plans. Number of Ordinary Shares authorised, fully paid and on issue Balance at the...

  • Page 26
    ...buy-back programme to fulfil obligations under employee share-based compensation plans. No treasury stock was utilised in the 2016 financial year. Total treasury stock held as at 30 June 2016 is 34,090 shares (30 June 2015: 34,090 shares). Staff Share Scheme Unallocated shares of the Air New Zealand...

  • Page 27
    ...CEO RESTRICTED SHARE RIGHTS 2016 CFO OPTION PLAN 2016 PERFORMANCE SHARE RIGHTS 2015 LONG-TERM INCENTIVE PLAN 2015 CEO OPTION PLAN* 2015 CFO OPTION PLAN 2015 Number outstanding Outstanding at beginning of the year Granted during year Exercised during year Forfeited during year Outstanding at the end...

  • Page 28
    ... using historical data over past 2-4 years; Risk free rate was based on 4-6 year zero coupon bond yields. WEIGHTED AVERAGE SHARE PRICE (CENTS) EXPECTED DIVIDEND YIELD (%) CEO Restricted Share Rights Plan 2016 EQUITY BETA MARKET RISK PREMIUM (%) CONTRACTUAL LIFE (YEARS) RISK FREE RATE (%) COST...

  • Page 29
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) For the year to and as at 30 June 2016 20. Reserves The Group's reserves, together with the equity accounted share of associates' reserves as at the reporting date are set out below: AIR NEW ZEALAND RESERVES 2016 $M AIR NEW ZEALAND...

  • Page 30
    ... 24. Financial Risk Management Air New Zealand is subject to credit, foreign currency, interest rate and fuel price risks. These risks are managed with various financial instruments, using a set of policies approved by the Board of Directors. Compliance with these policies is reviewed and reported...

  • Page 31
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) MARKET RISK Foreign Currency Risk Foreign currency risk is the risk of loss to Air New Zealand arising from adverse fluctuations in exchange rates. Air New Zealand has ...

  • Page 32
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) Foreign currency exposure of items recognised at reporting date, before hedging NZD $M USD $M AUD $M EUR $M JPY $M TOTAL $M As at 30 June 2016 ...

  • Page 33
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) Impact of hedging foreign currency risk The impact of the foreign currency hedging strategies (both hedge accounted and non-hedge accounted) on the financial statements ...

  • Page 34
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) The effective portion of changes in the fair value of foreign currency hedging instruments which were deferred to the cash flow hedge reserve (...

  • Page 35
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) FAIR VALUE HEDGES Underlying currency movements on aircraft designated in a fair value hedge are included within 'Property, plant and equipment' on the Statement of ...

  • Page 36
    ... foreign currency impact of the hedged item when it occurs. 2016 2015 Significant foreign exchange rates used at balance date for one New Zealand Dollar are: USD AUD EUR JPY GBP FUEL PRICE RISK Fuel price risk is the risk of loss to Air New Zealand arising from adverse fluctuations in fuel prices...

  • Page 37
    AIR NEW ZEALAND GROUP Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) Impact of hedging fuel price risk Weighted average strike prices of fuel derivatives Weighted average collar ceiling Weighted average collar floor Swap strike price ...

  • Page 38
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) INTEREST RATE RISK Interest rate risk is the risk of loss to Air New Zealand arising from adverse fluctuations in interest rates. Air New Zealand ...

  • Page 39
    ... Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its obligations as they fall due. Air New Zealand manages the risk by targeting a minimum liquidity level, ensuring long-term...

  • Page 40
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Notes to the Financial Statements (continued) As at 30 June 2016 24. Financial Risk Management (continued) Capital risk management The Group's objectives when managing capital are to safeguard the company's ability to continue as a going concern and to ...

  • Page 41
    ... Directors' fees Share-based payments 14 1 2 17 13 1 2 16 Certain key management personnel (including directors) have relevant interests in a number of companies (including non-executive directorships) to which Air New Zealand provides aircraft related services in the normal course of business...

  • Page 42
    ... statements, on pages 2 to 39, present fairly, in all material respects, the financial position of the Group as at 30 June 2016, and its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards ('NZ...

  • Page 43
    ... fleet lives and residual values which impacts carrying values and the depreciation charge. We challenged the Group's assumptions underpinning the calculation of residual values by comparison to external information such as third party sales prices, industry data and period end exchange rates...

  • Page 44
    ... Information The directors are responsible for all other information. The other information includes the Annual Shareholder Review and the information included with the Group financial statements and audit report in the Annual Financial Results. Our opinion on the Group financial statements does...

  • Page 45
    ... communicated with the directors, we determine those matters that were of most significance in the audit of the Group financial statements for the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public...

  • Page 46
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Historical Summary of Financial Performance For the year to 30 June 2016 $M 2015 $M 2014 $M 2013 $M 2012 $M Operating Revenue Passenger revenue Cargo Contract services Other revenue 4,481 349 172 229 5,231 4,113 317 258 237 4,925 3,851 287 277 237 ...

  • Page 47
    AIR NEW ZEALAND GROUP Historical Summary of Financial Position As at 30 June 2016 $M 2015 $M 2014 $M 2013 $M 2012 $M Current Assets Bank and short-term deposits Other current assets Total Current Assets Non-Current Assets Property, plant and equipment Other non-current assets Total Non-Current ...

  • Page 48
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Key Financial Metrics Five Year Statistical Review 2016 2015 2014 2013 2012 Profitability and Capital Management % EBIT1/Operating Revenue % EBITDRA2/Operating Revenue Passenger Revenue per Revenue Passenger Kilometre (Yield) cents cents Passenger ...

  • Page 49
    AIR NEW ZEALAND GROUP Key Operating Statistics For the year to 30 June 2016 2015 2014 2013 2012 Passengers Carried (000) Domestic International Australia and Pacific Islands Asia* America and Europe Total Total Group Available Seat Kilometres (M) Domestic International Australia and Pacific ...

  • Page 50
    ... Trading in Securities Directors and employees of Air New Zealand are subject to limitations on their ability to buy or sell Air New Zealand shares in accordance with Air New Zealand's Securities Trading Policy, the NZSX and ASX Listing Rules and the Financial Markets Conduct Act 2013. This policy...

  • Page 51
    ...-Executive Directors. The Audit Committee assists the Board in discharging its responsibilities in relation to the financial reporting, compliance and risk management practices of Air New Zealand. The Audit Committee is responsible for oversight of risk management and formally reviews the key risks...

  • Page 52
    ... under legislation and stock exchange listing rules. Board and Committee charters and policies of public relevance are published on Air New Zealand's web site at www.airnzinvestor.com. The Board receives assurances from the Chief Executive Officer and Chief Financial Officer that the declaration...

  • Page 53
    AIR NEW ZEALAND GROUP Corporate Governance (continued) Diversity and inclusion Air New Zealand continues to make strong progress delivering to diversity and inclusion objectives. Our focus continues on gender representation, in particular, to increase the number of females in leadership positions. ...

  • Page 54
    ... Zealand Diversity and Inclusion Policy can be found at: http://www.airnewzealand.co.nz/corporate-governance-policies. Differences in corporate governance practice to NZX code and ASX recommendations Under the NZSX and ASX Listing Rules, Air New Zealand is required to disclose in this Annual Report...

  • Page 55
    ... Holdings Limited and Air New Zealand Limited, and he is a previous director of Tourism New Zealand and Chair of Christchurch & Canterbury Tourism. Mr Bingham was a winner of the PATA Young Professional award. Across a 23 year career he has worked in the UK, USA, Singapore and New Zealand. 53

  • Page 56
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Directors' Profiles (continued) Robert (Rob) Jager BE (HONS), MBA Independent Non-Executive Director - Appointed 1 April 2013 Committees - Health, Safety and Security (Chair) Mr Jager is Chairman of the Shell Companies in New Zealand and General Manager...

  • Page 57
    AIR NEW ZEALAND GROUP Directors' Governance Interests The following are particulars of general disclosures of interest by Directors of Air New Zealand Limited holding office at 30 June 2016, pursuant to section 140(2) of the Companies Act 1993. Where applicable, the disclosures also include ...

  • Page 58
    ... (USA) Board of Trustees Compac Holdings Limited New Zealand Asset Management University of Auckland Endowment Fund Vector Limited Westpac New Zealand Limited Zespri Group Limited Trustee Chairman Director Trustee Director Director Director Dame Therese Walsh ASB Bank Limited DPMC Strategic Risk...

  • Page 59
    ... these positions. The total of fees to be paid to directors is subject to shareholder approval. Air New Zealand meets directors' reasonable travel and other costs associated with Air New Zealand business. Directors received the following fees and remuneration from Air New Zealand Limited in the year...

  • Page 60
    ... Business Limited ANNZES Engines Christchurch Limited Ansett Australia & Air New Zealand Engineering Services Limited C.I. Air Services Limited Eagle Air Maintenance Limited Eagle Airways Limited Mount Cook Airline Limited Pacific Leisure Group Limited (sold 22 January 2016) TEAL Insurance Limited...

  • Page 61
    AIR NEW ZEALAND GROUP Employee Remuneration Remuneration paid in FY16 including base for FY16, and incentive payments including performance rights issued under the LTI scheme that relate to FY15 performance and paid in FY16 New Zealand management 100,000-110,000 110,000-120,000 120,000-130,000 130,...

  • Page 62
    ... and to incentivise participants in the plan to enhance long-term shareholder value. In the 2016 financial year the plan available to Executives was the Air New Zealand Long-Term Incentive Performance Rights Plan (LTIP). Participation in any year is by annual invitation at the discretion of the...

  • Page 63
    ... and • The Air New Zealand CEO Restricted Share Rights Plan (CRSRP). Long-Term Incentive Performance Rights Plan The CEO was granted 706,731 performance rights under the LTIP in the 2016 financial year valued independently at $1.144 each, for a total value of $808,500 (2015 financial year: 749,027...

  • Page 64
    ...the Company contribution was $120,400 (2015 financial year: $114,280). Summary The remuneration paid to the CEO is summarised below: Remuneration Element 2015 Financial Year 2016 Financial Year Base Salary Short-Term Incentive Long-Term Incentive* Superannuation *Long-Term Incentives remain at risk...

  • Page 65
    ... GROUP Shareholder Statistics (continued) Substantial product holders The following information is provided in compliance with Section 293 of the Financial Markets Conduct Act 2013 and is stated as at 30 June 2016. The total number of listed ordinary shares of Air New Zealand Limited at that date...

  • Page 66
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 Operating Fleet Statistics (as at 30 June 2016) Boeing 777-300ER Number: 7 Average Age: 4.2 years Maximum Passengers: 332 Cruising Speed: 910 km/hr Average Daily Utilisation: 14:34 Boeing 777-200ER Number: 8 Average Age: 10.2 years Maximum Passengers: ...

  • Page 67
    ...Main Board Listing Rules were granted to the Company or relied upon by the Company during the financial year ended 30 June 2016: 1. A waiver from NZSX Listing Rule 8.1.7(b) to enable the issue of Long-Term Incentive Scheme Options to be adjusted following a capital restructure such as a rights issue...

  • Page 68
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 General Information (continued) Australian Stock Exchange When Air New Zealand fully listed on the ASX in July 2002, it undertook to include the following information in its Annual Report. Limitations on the Acquisition of Securities Constitution The ...

  • Page 69
    ... Officer Annual Meeting Date: Time: Venue: 30 September 2016 2.00 pm Air Force Museum of New Zealand, 45 Harvard Avenue, Wigram Christchurch Christopher Luxon Chief Financial Officer Rob McDonald General Counsel and Company Secretary John Blair Current Credit Rating Moody's rate Air New Zealand...

  • Page 70
    AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2016 68

  • Page 71
    AIR NEW ZEALAND GROUP 69

  • Page 72