Air New Zealand has revealed a second earnings downgrade for the year.
The airline said yesterday its June 30 year earnings could be up to $NZ60 million lower than forecast in March’s downgrade, thanks mainly to higher fuel prices.
And it could be up to $NZ110 million under the original guidance issued last August.
The airline said yesterday that based on the current market and reflecting an additional $NZ25 million impost from increased jet fuel prices it was now targeting 2019 earnings before tax to exceed $NZ340 million.
The announcement is the second earnings downgrade this year.
Air NZ’s cut echoes that 10 days or so ago from Virgin Australia which looks like falling into yet another loss for the 12 months to June 30, with losses in the Australian domestic market and higher fuel prices being major factors, just as weak domestic markets and higher fuel costs are for Air NZ.
Air NZ had been targeting 2019 earnings before tax in the range of $NZ340 million to $NZ400 million, based on its March 28 market update.
That was down on its 2019 earnings guidance of $NZ425 million to $NZ525 million, made in August 2018.
Air New Zealand shares were unchanged on Monday trading at $A2.56 on the ASX, down 1.5%. The shares are down more than 16% over the past year.
Since early this year Air New Zealand has been undertaking a cost-cutting program aimed at finding $NZ60 million in annual savings by the end of 2021.
Planned capacity growth will be cut to 3% to 5% a year over the next three years from the previous 5% to 7%.
Air NZ is also said yesterday it would spend $A3.9 billion ($US2.7 billion) on eight new Boeing Co 787 jets, allowing it to open up longer non-stop routes, such as Auckland-New York.
The deal has been rumoured for more than a month, but the big news from the announcement is the change of engines for the new jet from Rolls-Royce to GE for the new order.
The 787s will replace eight older Boeing 777-200ERs and leave the carrier with an all-Boeing wide-body fleet as well and Airbus A320 family jets for shorter flights.
Air NZ considered but rejected an Airbus deal to sell its 350 model jetliners.
Air NZ has had problems with Rolls-Royce engines that have proven problematic on its existing fleet of 13 787s and cost the airline a lot money with it having to lease replacement 777’s for when its existing jets were taken out of service.
The order comprises eight long-range 787-10s, with an agreement including an option to increase the number of aircraft from to 20. The deal also gives the airline the choice to shift from the larger 787-10 aircraft to smaller 787-9s, or a combination of the two.
“With the 787-10 offering almost 15 percent more space for customers and cargo than the 787-9, this investment creates the platform for our future strategic direction and opens up new opportunities to grow,” Air New Zealand Chief Executive Christopher Luxon said in a statement.
The eight jets will enter the Air New Zealand fleet between 2022 and 2027, the airline said.
