Air NZ signals drop in expected earnings for the year

By and is republished with permission.

Air New Zealand has adjusted its expected earnings for the 2024 financial year, forecasting less revenue than originally forecast.

The national carrier issued notice of the shift in a market update on the NZX today, citing tough conditions

The company’s expected earnings before taxation for the year have fallen $10 million from $200-$240 million to $190-$230 million.

“In February 2024, Air New Zealand issued guidance for the 2024 financial year, announcing expected earnings before taxation in the range of $200 million to $240 million,” the airline explained.

This range included the benefit of $65 million in Covid-related credit breakage for the year, with $45 million recognised in the first half, and $20 million of assumed credit breakage in the second half.”

Breakage is when a company profits from credit going unredeemed. For example, a gift card that expires before it’s claimed equates to cash in a business’ back pocket.

“Air New Zealand has continued to see softening in revenue conditions over the fourth quarter both domestically and on the North American market,” the carrier added.

“These softer revenue conditions are expected to result in lower underlying profitability for the 2024 financial year of approximately $40 million to $50 million.

“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 $20 million to $50 million.”

It said customers who have a Covid-related credit have until January 31 2026 to book travel for completion by December 31 2026.

“In light of the above… the airline expects earnings before taxation for the 2024 financial year to be in the range of $190 million to $230 million,” Air New Zealand said.

“This range includes the $40 million to $50 million impact of deteriorating market conditions noted earlier, as well as a total of $95 million in Covid-related credit breakage for the 2024 financial year.

“Future redemptions of Covid-related credits remain uncertain.”

Air NZ to hike Koru membership prices by up to 20%

The airlines said it was coming under pricing pressure from US carriers, which was driving weaker revenue on North American routes

Inflation was still hitting it, there was less domestic corporate and government demand, and the ongoing issues with Pratt & Whitney global engine maintenance requirements.

Sometimes when a business is growing, it needs a little help.

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