February 27, 2019 / 8:10 PM / 6 months ago

UPDATE 1-Air New Zealand H1 profit slumps as domestic growth slows

(Adds details, background on demand and CEO comment)

Feb 28 (Reuters) - Air New Zealand Ltd posted a 35 percent drop in half-year pre-tax profit on Thursday, hurt by softening tourism traffic and weaker domestic leisure travel.

The national carrier reported a pre-tax profit, the most closely watched measure of its performance, of NZ$211 million ($144 million) for the six months ended Dec. 31, compared with NZ$323 million a year ago.

The company warned last month of weaker earnings, highlighting broader concerns about slowing tourist arrivals to New Zealand and nearby Australia.

Both countries have been beneficiaries of a boom in tourism arrivals in recent years, led by the fast-growing Chinese market but an economic slowdown in China has reversed fortunes of late.

“We cannot ignore signals that the rate of growth has slowed somewhat from prior years,” said Chief Executive Christopher Luxon.

The airline said last month it had launched a review of its network, fleet and cost base, and added that an update on the review is expected at the end of March.

The airline added that a 28 percent jump in fuel and operational costs offset a 7 percent rise in operating revenue.

Air New Zealand’s rivals including Australia’s Qantas Airways Ltd and Singapore Airlines Ltd have also struggled to maintain margins due to higher fuel prices, but the pressure would subside going forward given the price of oil has fallen from a peak in October.

Earlier this week, Air New Zealand said it would slash domestic fares by as much as 50 percent as it shook up its pricing structure in response to the softening travel market.

The company declared an interim dividend of 11 New Zealand cents a share, in line with what it declared a year ago.

$1 = 1.4628 New Zealand dollars Reporting by Nikhil Kurian Nainan and Aby Jose Koilparambil in Bengaluru Editing by Alison Williams and Frances Kerry

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