Air New Zealand (ASX:AIZ) has adjusted its first-half earnings guidance due to persistent demand weakness, as softer leisure travel compounds the weaker domestic corporate and government trends.
The airline stated on Wednesday that it anticipates earnings to be "around the lower end of its $NZ180 million to $NZ230 million range initially provided on October 12th.”
Simultaneously, the airline, while abstaining from offering full-year guidance, cautioned that the June half-year will present increasing challenges.
"Early indications of softness in domestic travel, particularly in corporate and government travel, which were noted in the October 12th update, have persisted, with late booking activity remaining weaker compared to the previous year.
"More recently, the airline has observed softer leisure demand in both the Domestic and Trans-Tasman markets.
"Demand for travel to North America remains solid, albeit the airline is experiencing additional pricing pressure due to increased competition from US carriers. Asia and Pacific Islands demand remains unchanged."
The airline stated it will closely monitor booking patterns.
"As previously announced, $45 million of Covid-related credits that are highly unlikely to be redeemed by the extended expiry date are included within the above guidance range.
Complicating matters is the ongoing issue with global Pratt & Whitney engine problems in the business. Additionally, economic and inflation risks persist, resulting in Air New Zealand leasing replacement aircraft to fill domestic and some international services. Some routes will be suspended for up to two years while the engine repair issues are addressed.
Once again, Air NZ clarified that it is not providing full-year guidance and cautioned investors and analysts "against extrapolating first-half guidance and currently expects the second half of the financial year to be increasingly challenging.”
Air NZ shares have declined by 10% year to date and 15% in the last six months. They closed at 61 A cents on Tuesday.
