Shares in Qantas fell nearly nine per cent yesterday following the announcement by Air New Zealand that it was forecasting weaker than expected earnings for the 2019 financial year.
In an ASX update issued yesterday, Air New Zealand said it now expects earnings before tax to be between $340 million and $400 million for the 12 months to 30 June, which includes the impact of the global Rolls-Royce engine issues.
Air NZ’s previously announced guidance for underlying earnings before tax was between $425 million and $525 million, which excluded an estimated impact of $30 million to $40 million from schedule changes prompted by the Rolls-Royce engine issues.
The airline said the revised earnings guidance – which is down roughly 20 per cent – reflects updated revenue forecasts based on recent forward booking trends.
Air NZ expects revenue growth to remain positive, but at a slower rate than previously anticipated. The markets showing sings of lower growth for the airline include leisure travel within domestic NZ and softening inbound tourism traffic.
The company’s capacity growth has been reduced to approximately four per cent for the full year, compared to its original capacity guidance of four to six per cent.
Air NZ chief executive Christopher Luxon said the airline was “concerned with our latest outlook, which reflects the softer revenue growth that we are seeing in the second half of the year.
“Therefore, we have commenced a review of our network, fleet and cost base to ensure the business is on a strong footing going forward,” he said.
Air NZ’s share price tumbled more than 13 per cent to $2.70 yesterday following the earnings update.
The negative outlook was also felt by Qantas (which has a codeshare deal with Air New Zealand), with shares in the Aussie airline falling nearly nine per cent to $5.59 on Wednesday.