February 26, 2020 / 8:20 PM / a month ago

UPDATE 2-New Air New Zealand CEO launches strategic review after 1H profit falls

* Adjusted pre-tax earnings fall 8.8%

* Capacity to grow slower than expected due to virus

* Maintains interim dividend, shares up 5% (Recasts with executive comments)

By Jamie Freed and Rashmi Ashok

SYDNEY/BENGALURU, Feb 27 (Reuters) - Air New Zealand Ltd said on Thursday its new chief executive had launched a comprehensive strategic review of its business after the airline announced its fourth consecutive fall in first-half earnings.

It said capacity would rise by 1.5-2.5% for the full year ending June 30, down from an earlier plan of 4-5% as it slashes domestic and international flights due to weaker demand as a result of the coronavirus, which it on Monday estimated would hit earnings by NZ$35 million to NZ$75 million.]

Shares surged more than 5% in early trade on Thursday due to confidence in management actions even though Air New Zealand’s adjusted pre-tax profit, its most closely watched measure, was down 8.8% to NZ$198 million ($125.00 million) in the six months ended Dec. 31 due to higher maintenance and airport costs and a weaker New Zealand dollar.

The interim results were the first presented by new CEO Greg Foran, a former senior executive at U.S.-based retailer Walmart Inc who returned to his home country to take up the new role earlier this month.

He said the comprehensive strategic review would cover the airline’s route network, sustainability agenda, customer service, loyalty division, digital investments, capital returns, profitability and culture.

“It will involve reviewing our strategic opportunities and risks not only to assess where we can play but where we can win,” Foran told investors on a conference call. “Like any business there are always opportunities where you can tweak things and adjust them.”

The airline maintained its interim dividend at 11 New Zealand cents per share fully imputed, which Foran said reflected a business that remained in good shape despite uncertainties associated with the coronavirus.

Air New Zealand has said it will cut capacity in Asia by 17%. Chief Financial Officer Jeff McDowall said there had been weak demand, not only from mainland China but from Hong Kong, Japan, Taiwan and Singapore, which had also resulted in less demand for flights to Australia and domestic destinations like Christchurch and Queenstown.

However, McDowall said demand for flights to the United States remained strong, especially outbound from New Zealand where it had earlier been lower due to a weaker local currency.

“You could speculate some people are choosing the U.S. as a destination in preference to Asia,” McDowell said.

$1 = 1.5840 New Zealand dollars Reporting by and Jamie Freed in Sydney and Rashmi Ashok in Bengaluru; Editing by Shailesh Kuber and Tom Brown

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