12 Oct 2023

Air New Zealand expects lower profits in first half of financial year

12:42 pm on 12 October 2023
Air New Zealand

File photo. Photo: RNZ / Nate McKinnon

Air New Zealand is expecting a lower first-half profit as it faces volatile fuel prices, increased competition, and uncertain demand.

The national airline is forecasting a pre-tax profit of between $180 million and $230m for the six months to the end of December. The year before, their profit for the same period was $299m.

The forecast is based on an assumption the average jet fuel price will remain at US$110 per barrel for the rest of the first half of the financial year.

"The economic environment continues to be uncertain and future performance may be impacted by a number of factors," the company said in an update on the New Zealand Stock Exchange.

"These factors include increased international competition, volatile fuel prices, currency fluctuations and ongoing inflationary pressures."

The airline said customer demand remained solid across most markets, but there had been less certainty with domestic travel, particularly corporate and government travel.

Air New Zealand gave an update on its 16 planes with Pratt & Whitney engines, which might need to be checked for possible microscopic cracks after problems were raised by the engine-maker.

Although Air New Zealand expected extra maintenance checks to have a noticeable impact on parts of its flying schedule, the financial impact of this on the first half of the 2024 financial year was expected to be "nominal".

"It does not present a safety issue," the airline said.

Air New Zealand cautioned against extrapolating first-half earnings guidance to the full year, given the many uncertainties in the trading environment.

It still has about $200m in Covid-related credits yet to be redeemed and announced last week that passengers had two more years to use them.

Air New Zealand said $45m of those credits were highly unlikely to be redeemed, even with the extended expiry date.

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