24 Feb 2020

Coronavirus could cut Air New Zealand earnings by $35m-75m

9:56 am on 24 February 2020

The coronavirus outbreak is set to cost Air New Zealand as much as $75 million, as it moved to cut more flights to lessen the impact.

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Photo: 123rf

The airline has issued a revised forecast for its full year earnings, cutting its estimate of operating earnings by between $35m to $75m to a range of $300m to $350m.

"The airline's revenue outlook for the remainder of the year is expected to be adversely impacted as a result of softer demand for travel to and from Asian destinations. Weaker forward bookings for travel on the Tasman and domestic networks have also emerged as a result," Air New Zealand said in a statement.

"Immediate steps have been taken to mitigate the impact of lower demand, including adjustments to capacity across the Asia, Tasman and Domestic networks."

Air New Zealand said it would suspend flights to Seoul from early next month through to the middle of the year, in addition to the cuts it's already made to its services to China.

It also said it would reduce trans-Tasman capacity by 3 percent and also some domestic services, mainly between Auckland, Christchurch and Queenstown.

However, it said there would be some offset because of savings from cheaper fuel.

The carrier's chief executive Greg Foran, who started only three weeks ago, said the environment was challenging, but there was confidence the airline would come through in good shape.

"Air New Zealand is a resilient business and we have demonstrated the ability time and again to respond quickly to changing market conditions."

Air New Zealand will issue its half year earnings to the end of last December later this week, which are expected to show the impact of slowing global tourism.

Last week, Australia's national carrier Qantas said it expected the coronavirus outbreak to hit its full year earnings by as much as $A150m, as it reported a 19 percent fall in its underlying earnings.

NZ firms signal downturn

Most New Zealand businesses trading with China expect to suffer a drop in export revenue due to coronavirus, according to a survey of 170 companies.

The New Zealand Business Roundtable in China survey, carried out this month, found 81 percent of businesses questioned expected revenue to be down at least 10 percent this year, with most of those expecting the reduction to take place in first quarter.

The most common change in business behaviour was people cancelling business trips and the most common concerns were disruption to supply chains, a slowdown of operation and threats to personal health.

While there was significant uncertainty surrounding the containment of Covid-19, most respondents expected the issue to clear up within the next six months.