Air New Zealand warns competition, slow demand will hit earnings

Air New Zealand warned that earnings will drop in the six months through June amid increased competition from US rivals and slowing corporate demand.

Full-year pretax profit could drop to as little as NZ$200 million ($123 million) from NZ$585 million a year earlier, the Auckland-based airline said Monday. The company reports first-half results on Feb. 22 and reiterated earnings will be at the low end of a range from NZ$180 million to NZ$230 million.

“A number of economic and operational conditions have deteriorated further and are increasingly expected to have a significant adverse impact on its performance in the second half of the financial year,” the airline said, adding it will be “markedly lower than the first half.”

Air New Zealand has come under pressure as more airlines return to the Pacific long haul routes into the US as global travel revives after the Covid pandemic. Delta Air Lines began a new service into largest city Auckland late last year.

“Forward bookings indicate that the increased capacity and further pricing pressure from US carriers is expected to more adversely impact revenue performance for the remainder of the financial year,” Air New Zealand said.

At the same time, the company is experiencing ongoing weakness in domestic demand from New Zealand companies and the government, it said.

The airline said it will incur costs of about NZ$35 million in the second half relating to the need to get Pratt & Whitney engines on some of its fleet repaired. The ongoing issue has required revised schedules, more contact-center resources and the cost of a short-term leased aircraft, it said.