ShareHOLDER ENQUIRIES Shareholder Communication Air New Zealand’s investor website www.airnzinvestor.com provides shareholders with monthly operating statistics, financial results, stock exchange releases, corporate governance, annual meetings, investor presentations, important dates and contact details. Shareholders can also view webcasts of key events from this site. Shareholders who would like to receive electronic news updates can email Investor Relations on [email protected] Share REGISTRAR Link Market Services Limited Level 12 120 Albert Street Air New Zealanders Auckland, New Zealand recently stripped off and slapped PO Box 91976, Auckland 1142, New Zealand on the body paint to illustrate that our Email: [email protected] Website: www.linkmarketservices.com airfares have... New Zealand Phone: (64 9) 375 5998 Fax: (64 9) 375 5990 Australia Phone: (61 2) 8280 7111 Investor relations office Private Bag 92007 Auckland 1142 New Zealand Phone: 0800 22 22 18 (New Zealand) (64 9) 336 2287 (Overseas) Fax: (64 9) 336 2664 Email: [email protected] Website: www.airnzinvestor.com FULL ANNUAL FINANCIAL REPORT At Air New Zealand we like to take a straight forward honest approach CONTENTS The full Annual Financial Report is available by visiting - it's the way we do business. 01 EARNING REWARDS our website www.airnzinvestor.com IN TESTING TIMES 02 CEO UPDATE OR 06 HAPPY TRAVELS You may elect to have a copy sent to you by contacting 08 AGILITY IN ACTION Investor Relations. 10 REGIONAL RECIPE 12 FUEL EFFICIENCY 14 FINANCIAL COMMENTARY 18 FINANCIAL SUMMARY Thisreport was printed using mineral oil free vegetable based inks on paper from third party certified forests and manufactured under the strict Eco Management and Audit Scheme and ISO environmental 14001 systems. Insight Creative Limited, Auckland/Sydney. 08/09 AIR098 Board of directors John Palmer, Chairman 6 Roger France, Deputy Chairman Grabaseat won the Philips Innovation Award at the Tourism Industry Awards. Paul Bingham Dr Jim Fox 7 Jane Freeman Judges’ Choice Trophy awarded for an outstanding frequent flyer programme at the Loyalty 2009 Awards. Warren Larsen John McDonald IN A YEAR OF ALMOST UNPRECEDENTED FINANCIAL VOLATILITY AND SUBSEQUENT SLUGGISH CONSUMER DEMAND, AiR NEW ZEALAND HAS DONE WELL TO RECORD AN OPERATING PROFIT. The past year has been characterised by gloomy economic In these difficult times we have continued to see the spirit and conditions and consumers facing sharp declines in real personal morale of Air New Zealanders grow. Our relative performance over wealth. Discretionary expenditure such as travel has been hit the year is a reflection of the work they have put in to keep ahead harder than other parts of the economy. The combination of excess of competitors. Our on time performance and customer service capacity, deteriorating demand and significant discounting have all combined with the strength and depth of our network is keeping worked against us. Despite all this we have been able to adapt to the pressure on competitors. the conditions and enhance our already strong financial position. QUICK REACTIONS Our ability to react quickly remains a key competitive OUR STRONG FINANCIAL POSITION HAS GIVEN US THE ABILITY TO MAKE INVESTMENTS THAT WILL KEEP US AHEAD advantage and this ability will continue to serve us through OF COMPETITORS. IN TIMES OF DIMINISHING DEMAND, the next period of uncertainty. A constant focus on cost is SUPERIOR PRODUCT AND SERVICE ARE IMPORTANT. now entrenched in the way we do business and we continue to look for ways to lower costs. We will continue to assess the shape of our network and adapt in response Normalised earnings before tax for the 2009 financial year were to changes in demand patterns. $145 million, a 26 percent decrease on last year. This result positions Air New Zealand as one of the top performing airlines LET’S LIGHTEN UP globally, but it falls short of delivering shareholders an appropriate Tough times don’t need to be dreary. Air New Zealanders are commercial return. perfecting the art of having fun while taking their jobs seriously. This has been illustrated by the ‘Nothing to Hide’ advertising After reviewing the current trading environment and the airline’s campaign and, as fanatical sponsors of New Zealand Rugby, we financial position, the Board has declared a fully imputed have recently produced ‘Our Rugby Song’ drawing on enthusiastic dividend of 3.5 cents per share. This reflects the 2009 operating people from across the business. performance while acknowledging that economic conditions remain challenging throughout the next financial year. The dividend record We have also been re-examining the structure of our business date is 11 September 2009. to determine how we should position ourselves for the future. Especially in these volatile times airline industry economics can INNOVATING WITH CONFIDENCE change quickly. We need to understand the changing dynamics The willingness we have shown to innovate in difficult times and where the greatest value can be unlocked. We intend to stay illustrates the self confidence we have developed to understand ahead during this time of inevitable change and will continue to and anticipate customer behaviour. We have smoothly implemented make the sometimes tough decisions to get there. We still see the 01 world-first check-in innovations that have made vast improvements “Fasten Seat Belts” sign on as we start the 2010 financial year, to domestic travel, installed in-flight entertainment for all aircraft but are confident about our competitive position. flying trans Tasman and are fitting efficiency improving winglets on our Boeing 767-300 fleet. ND A L A Our strong financial position has given us the ability to make investments that will keep us ahead of competitors. In times of REHOLDER REVIEW diminishing demand, superior product and service are important. A Our decision to invest in lie flat beds for our Business Premier AIR NEW ZE SH cabin has paid off and we are now focusing on lifting our game again when the Boeing 777-300ER aircraft are introduced from John Palmer Chairman the end of next year. Home Profile Friends Inbox Wall Info Photos Boxes + FOR A NUMBER OF YEARS NOW WE’VE BEEN TALKING ABOUT View Photos of Rob (5) OUR FLEXIBILITY THAT ENABLES Send Rob a Message US TO ADAPT THE BUSINESS Poke Rob QUICKLY TO THE PREVAILING Information CONDITIONS. THE 2009 FINANCIAL Networks: YEAR PRESENTED US WITH THE Air New Zealand PERFECT CONDITIONS TO Birthday: May 6, 1961 DEMONSTRATE THIS ABILITY. AS THE GLOBAL FINANCIAL CRISIS Friends UNRAVELLED, DEMAND FOR AIR 129 friends See All TRAVEL RAPIDLY DETERIORATED AND WE HAVE BEEN QUICK IN RESPONDING BY REDUCING THE NUMBER OF SEATS WE FLY. Gerard Rabbit James Cooper-Fyfe AS A RESULT AiR NEW ZEALAND’S FINANCIAL PERFORMANCE HAS BEEN AMONG THE BEST IN THE INDUSTRY. Jessica McEwan Leah M Evans Share Attach Ronny Franks Young Ly Create an Ad Innovate and lead Become an Air New Zealand Fashion Week Fan Our continued investment over this tough period is setting us apart from our competitors. A good example of this has been the changes we have made to domestic travel. With the duration of the majority of our direct services within New Zealand being less than an hour, on time performance and a fast and efficient transit through airports is critical. Air New Zealand’s ability to fly its domestic and international Immerse yourself in AIR NEW ZEALAND customers into and out of Queenstown over the busy winter FASHION WEEK, 21–25 September 09. season has been enhanced with 18 aircraft now fitted with 1,786 people are fans of Air New Zealand Fashion Week advanced navigation technology. Required Navigation Performance (RNP) was introduced onto six of Air New Zealand’s 737s two years ago, with the initiative so successful that it has now recently been extended to the airline’s A320 aircraft, making Air New Zealand the first airline in the world to have Happy Travels an entire A320 fleet RNP enabled. Adapting the business to survive can be tough as we have to say good bye to things of which we have grown fond. In June our first Boeing 747-400, which was delivered to us in 1989, departed Auckland for the last time to the US where it is being dismantled for parts. This signifies the start of the exit programme for our Boeing 747-400 fleet which have served With Air New Zealanders feeling happier and more us well for almost two decades. connected at work we think it’s no coincidence that customer compliments are up 67%. Our first Boeing 777-300ER aircraft is due to be delivered in November next year. After reviewing the catalogue of seating and interiors for these aircraft, we were underwhelmed. Therefore we have been working to design our own. We are looking to innovate in this space and have a team of Air New Zealanders working to develop our own bespoke Regional New Zealand interiors. We look forward to unveiling these early next year and are certain that these will be instrumental in maintaining our market position. 03 Ed Sims Anyone who is a fan of kiwi-can-do is going to ND love our 777-300ER interiors. A L Tues at 10.30 am A Find out the ingredients for a great regional airline on page 11. REHOLDER REVIEW Write a comment... A AIR NEW ZE SH Home Profile FriendsRob Inbox Fyfe sustainable second-generation biofuel jatropha. This New media significant step forward was completed well ahead of experts’ original forecasted timeframe. As part of our strategy to be responsive to change we are developing a greater understanding of how Further research this year has shown that jatropha our customers are altering the way they interact is unlikely to be Air New Zealand’s primary source and gather information as a result of technology.