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Air New Zealand expects weaker second half to FY2024

written by Jake Nelson | February 20, 2024

Victor Pody shot this Air New Zealand 777-300ER in Melbourne.

Air New Zealand has warned that its second-half results are likely to suffer amid increased costs and competition from US airlines.

The Kiwi carrier, which in 2023 posted a full-year profit after “several turbulent years”, said in guidance to investors that it expects earnings before tax in 2023–24 to be between NZ$200 million and $240 million, including $20 million in COVID-19 credit breakage over the second half.

“Air New Zealand notes that a number of economic and operational conditions have deteriorated further and are increasingly expected to have a significant adverse impact on its performance in the second half of the financial year,” the carrier said.

“In light of these conditions, the airline considers that performance for the second half of the 2024 financial year will be markedly lower than the first half.”

Air New Zealand cited “significant inflation” and “ongoing weakness in domestic corporate and government demand” as factors, and also noted its forward booking profile, which “indicates that the increased capacity and further pricing pressure from US carriers is expected to more adversely impact the forward revenue performance for the remainder of the financial year”.

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The airline also noted “temporary cost headwinds to alleviate operational pressures and customer impacts from the previously disclosed unplanned Pratt & Whitney global engine maintenance requirements”, which will result in the suspension of its Hobart services from April.

“These total approximately $35 million for the second half of the financial year and include the cost of short-term leased aircraft and significant additional contact centre resources,” it said.

The necessary maintenance on the engines powering Air New Zealand’s A320neo and A321neo aircraft is the result of a “rare condition” involving the powder metal used for certain parts.

Flights from Auckland to Seoul will also be paused from 1 April to allow for more resiliency when the engines on Air New Zealand’s 787 fleet require regular maintenance.

“Air New Zealand has 17 A320/321neo aircraft in its fleet of 108 aircraft, serving Australia, the Pacific Islands and domestic New Zealand. While this maintenance issue does not present a safety issue, it has caused Air New Zealand to revise its flight schedule as a result of adjustments made to the engine maintenance plan,” said Air New Zealand CEO Greg Foran in November.

“While both routes have performed well, we need to ensure we can deliver a reliable service across the rest of our network and get customers on our most in-demand routes to where they need to be. Customers will still be able to book to Hobart and Seoul with Air New Zealand, but these flights won’t be direct and will be partly operated by our partner airlines.”

Up to 700 GTF engines are expected to be affected by the issue over the next three years, with the strongest impact in the coming year. Air New Zealand expects to have up to four aircraft grounded at any one time.

Air New Zealand will release its interim half-year results on Thursday.

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