Air New Zealand (ASX:AIZ) trimmed its annual earnings estimates on Monday, citing cost-of-living pressures leading to softer revenue in domestic travel, as well as more competition on its key North American routes.
The downgrade saw the shares dip to a near two-year low of 55 NZ cents, the lowest since July 2022. The shares then edged up to 57.5 NZ cents.
New Zealand's flag carrier now expects earnings before taxation between NZ$190 million and NZ$230 million for the year ending June 30, 2024, down from the previous estimate of NZ$200 million to NZ$240 million.
"North American performance continues to be impacted by very competitive pricing pressures, as the market adjusts to the significant capacity added into the New Zealand market by U.S. carriers," Air NZ said in its Monday statement.
Earlier in February, the company forecast lower earnings for 2024 and flagged an impact from high engine maintenance costs as it struggles to maintain capacity, dealing with its share of the worldwide problems with Pratt and Whitney engines.
The airline has said the problems will persist for at least two years and could see up to four planes out of service at any one time.
It is dry leasing replacement jets, some of which are flying in the Australasian market at the moment.
The airline has been struggling to cope with stiff competition from its U.S. peers on pricing terms.
Air New Zealand said that since providing that guidance at the start of this year, it "has continued to see softening in revenue conditions over the fourth quarter both domestically and on the North American market.
"Domestic performance has seen ongoing softening, with challenging economic conditions and ongoing cost-of-living pressures. Government and corporate demand remains subdued.
"North American performance continues to be impacted by very competitive pricing pressures, as the market adjusts to the significant capacity added into the New Zealand market by US carriers."
Air New Zealand also said its earnings will take a hit of NZ$95 million in COVID-related credit breakage for this financial year.
"Separately, following a significant decline in the rate of redemption of Covid-related credits in recent months, the airline has increased the assumed level of additional Covid-related credit breakage for the second half from NZ$20 million to NZ$50 million.
"Future redemptions of Covid-related credits remain uncertain. Customers who have a Covid-related credit have until January 31, 2026, to book travel for completion by December 31, 2026," the airline explained.
