Air New Zealand Profit Warning: Weaker Bookings and Higher Costs Impact Annual Profits
Air New Zealand has issued a profit warning due to weaker than expected bookings, higher costs, and the global recall of Pratt & Whitney jet engines. The airline stated that both economic and operational conditions have worsened, and as a result, it anticipates a significant drop in performance for the first half of the year ending in June compared to the previous six months.
The company has predicted annual pretax earnings to be between 200 million New Zealand dollars and NZ$240 million. This forecast is based on an assumption of an average jet fuel price of US$105 per barrel for the second half of the year. However, Air New Zealand has expressed concerns about its forward bookings, stating that increased capacity and pricing pressure from U.S. carriers are expected to have a negative impact on revenue for the remainder of the financial year.
In addition to these challenges, the airline also highlighted the impact of significant inflation on its cost base and weakness in domestic business and government demand. Air New Zealand expects to incur NZ$35 million in costs during the second half of the year as a result of the Pratt & Whitney setback. This figure includes the use of leased aircraft on a short-term basis.
Air New Zealand's profit warning highlights the ongoing difficulties faced by the airline industry, including the impact of global events and competitive pressures. The company's lower performance expectations serve as a reminder of the challenges faced by airlines in maintaining profitability in a dynamic and competitive market.
Analyst comment
Negative news. Air New Zealand is warning of lower profits due to weaker bookings, higher costs, and the global recall of Pratt & Whitney jet engines. The company expects its performance to be significantly lower in the next six months and has forecasted annual pretax earnings of NZ$200-240 million. The increased capacity and pricing pressure from U.S. carriers are expected to further impact revenue. Weakness in domestic business and government demand, as well as inflation on costs, are also affecting the airline.
