30 Jan 2019

Air New Zealand lowers earnings forecasts, faces slower passenger growth

10:52 am on 30 January 2019

Air New Zealand has lowered its earnings forecast as it faces slower passenger growth and the costs of repairing engines on its long haul planes.

An Air New Zealand 787-9 Dreamliner.

Air New Zealand chief executive Christopher Luxon said the company was concerned with its latest outlook and that it had begun a review of its network, fleet and cost base. Photo: AFP

The company said it expected underlying earnings of $340 - $400 million for the June year, which compared with a previous forecast of $425 - $525 million.

Chief executive Christopher Luxon said it had detected a slowdown in its forward bookings, with growth in sales looking to be slower than assumed.

"We are concerned with our latest outlook which reflects the softer revenue growth that we are seeing in the second half of the year."

Christopher Luxon

Christopher Luxon Photo: Supplied / Air New Zealand

Mr Luxon said the softening passenger demand was appearing in the domestic leisure travel market and inbound international tourism traffic.

"We have commenced a review of our network, fleet and cost base to ensure the business is on a strong footing going forward."

It's taken steps to keep a lid on growth in the number of seats it offers to better match expected passenger numbers. However, there was some offset to the slowing in demand by a recent fall in fuel prices.

The new forecast included an estimated $30m-$40m to cover costs incurred because of the problems with the Rolls-Royce engines used on its Boeing 787 Dreamliner planes.

Air New Zealand had to ground some of the planes and lease replacements while the engines were repaired.

The company reiterated a forecast dividend payout of 11 cents a share when it reports its six-month result at the end of February.

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