Home » News » Air NZ downgrades profit guidance again as inflation, demand woes continue

19 February, 2024

Air NZ downgrades profit guidance again as inflation, demand woes continue

An Air New Zealand Airbus A320-271N plane, registration ZK-NHB, arriving from Queenstown as flight ZK-NHB and taxiing to the international terminal of Sydney Kingsford-Smith Airport. She is passing information signs about the main runway (red and white) and taxiways (yellow and black). This image was taken from Shep's Mound, Mascot at sunset on 25 August 2023.

Air New Zealand has announced that inflation, low domestic demand, international competition from US carriers and plane repair costs will mean its 2H24 performance will be markedly lower than the first half.

On 13 December 2023, Air New Zealand updated its first half guidance and cautioned against extrapolating that guidance to the second half. The airline expected the second half of the financial year to be increasingly challenging given the aforementioned challenges.

Air NZ said the upcoming interim financial result for the six months ended 31 December 2023 will be consistent with that 13 December 2023 guidance.

Air NZ gave further insight on the economic and operational conditions that will have an adverse impact on its performance in the second half of the financial year here:

The airline’s forward bookings profile which indicates that the increased capacity and further pricing pressure from US carriers is expected to more adversely impact the forward revenue performance for the remainder of the financial year.
The cumulative impact of significant inflation on the cost base.
Ongoing weakness in domestic corporate and government demand.
Temporary cost headwinds to alleviate operational pressures and customer impacts from the previously disclosed unplanned Pratt & Whitney global engine maintenance requirements. These total approximately $35 million for the second half of the financial year and include the cost of short-term leased aircraft and significant additional contact centre resources.

In this context, and assuming an average jet fuel price of USD$105/bbl for the second half, the airline currently expects earnings before taxation for the 2024 financial year to be in the range of $200 million to $240 million. This range includes $20 million of currently assumed additional Covid related credit breakage over the second half. Future redemptions of Covid-related credits remain uncertain and subject to further actions.

Air New Zealand said it will continue to assess the likely impacts and duration of these conditions and circumstances.

Advertise with us

Email the Travel Weekly team at traveldesk@travelweekly.com.au