Air New Zealand shareholders will receive an unchanged interim dividend of 11 NZ cents per share despite the company confirming an earlier earnings downgrade yesterday for the six months to December.
Air New Zealand warned of a slide in earnings in a trading update issued in late January and yesterday revealed an $NZ80 million fall in earnings to $NZ152 million for the December half.
That was a 35% drop from the $NZ232 million in the December 2017 half and the airline is warning of more headwinds in the future.
The shares lost 3% to $A2.38 on the ASX, a far cry from the 15% plunge when the profit downgrade was issued on January 30.
In that downgrade, Air NZ cut its full-year earnings outlook to between $NZ340 million and $NZ400 million for the June 30 year.
That outlook was reconfirmed by Air NZ in yesterday’s announcement.
The new forecast was down from the previous forecast of $NZ425 million to $NZ525 million, which excluded an estimated impact of up to$NZ40 million due to schedule changes which stemmed from problems with Rolls Royce engines on its new Boeing 787 Dreamliners.
CEO Christopher Luxon said growth in the New Zealand market was slowing from previous years to be more in-line with other developed markets.
“While we continue to expect solid growth across our key markets including domestic New Zealand, we cannot ignore signals that the rate of growth has slowed somewhat from prior years,” Luxon said.
The performance across the Tasman is in stark contrast to the solid profits and revenue gains reported by Qantas and Virgin Australia for the December half year. The two airlines plus Qantas subsidiary Jetstar operate in and to and from the NZ market against Air NZ.
Just six months ago Air New Zealand was celebrating its second-highest annual profit ever when it posted an $NZ390m after-tax profit. Now the airline is looking to cut costs.
Now the airline was looking at ways to reduce costs and stimulate demand.
On Tuesday the airline announced a big round of price cuts with entry-level fares on 41 domestic routes slashed by 50% in a take it to the competition (Qantas, Virgin, Jetstar) approach.
The airline says a review of its network costs started in January and is still underway with an update expected by the end of this month.
Revenue rose 7% to $NZ2.9 billion but that improvement was overwhelmed by a 28% jump in fuel and operational costs for the half year.
Revenue was “more than offset” by a 28 percent increase in fuel price and higher operational costs.
