Air New Zealand has issued a warning on its annual profits due to a range of factors including weaker bookings than anticipated, higher costs, and the impact of a global recall of hundreds of Pratt & Whitney jet engines. The airline has stated that various economic and operational conditions have worsened, and as a result, it expects a significant decline in performance in the first half of this year compared to the previous six months.
The company has estimated its annual pre-tax earnings to be between 200 million and NZ$240 million, assuming an average jet fuel price of US$105 per barrel for the second half of the year. Air New Zealand has cited the increased capacity and pricing pressure from U.S. carriers as potential factors that may adversely affect its forward revenue performance for the rest of the financial year. Furthermore, significant inflation on its cost base and ongoing weakness in domestic business and government demand are also impacting its financial outlook.
Additionally, the carrier expects to incur NZ$35 million in costs during the second half of the fiscal year as a result of the Pratt & Whitney setback. This includes utilizing leased aircraft on a short-term basis.
Despite the challenges it faces, Air New Zealand remains committed to addressing these issues and minimizing their impact. The company is actively implementing strategies to manage costs and improve its revenue performance. However, it is clear that the profit warning will have an impact on the company’s overall financial position.
It is worth noting that Air New Zealand is not alone in facing these challenges. The aviation industry as a whole has been grappling with various headwinds, including rising fuel costs, increased competition, and geopolitical uncertainties. The profit warning serves as a reminder of the volatile nature of the airline industry and the importance of adapting to changing market conditions.
In conclusion, Air New Zealand’s profit warning underscores the difficult operating environment the airline is currently facing. The company is working to address the various factors impacting its financial performance and is implementing measures to mitigate their effects. However, it remains to be seen how successful these efforts will be in the face of ongoing challenges.
Analyst comment
Negative news. The market is expected to be negatively impacted as Air New Zealand warns of weaker bookings, higher costs, and the impact of a global recall of engines. The company forecasts significantly lower performance for the half year, with increased capacity and pricing pressure from U.S. carriers hampering revenue. Inflation on costs and weakness in domestic demand further affect its financial outlook. Additionally, costs related to the Pratt & Whitney setback add to the challenges.
