Air New Zealand Expects Lower Earnings in First Half of Fiscal 2024
Air New Zealand Flags Softness in Domestic Travel Demand
Air New Zealand has projected lower earnings for the first half of fiscal 2024, citing a recent decline in domestic travel demand and volatility in jet fuel prices. This announcement has led to a five-month low in the company’s shares. The country’s flag carrier expects earnings before tax for the first half to be between NZ$180 million ($108.36 million) and NZ$230 million, compared to NZ$299 million reported in the same period last year.
Factors Impacting Earnings
The softness in travel demand can be attributed to people being more cautious with their spending habits due to high interest rates and inflation. In such circumstances, air travel tends to take a back seat to other modes of transportation. Additionally, jet fuel prices and the weaker New Zealand dollar have adversely affected costs during the first financial quarter. Jet fuel prices increased by 35% from July to September but have since come down by almost 10%. The airline assumes an average jet fuel price of $110 per barrel for the remainder of the first half of fiscal 2024.
Volatility in Fuel Prices
The recent volatility in fuel prices is a cause for concern for many airlines. Energy market price swings can have a significant impact on profits. Air New Zealand, like other carriers, will be closely monitoring fuel prices to mitigate any potential losses.
Impact of Engine Issues
Air New Zealand had previously warned that inspections of RTX’s Pratt & Whitney engines would affect its flight schedule from next year. However, the company now states that the financial impact from these engine issues on the first half of 2024 is expected to be minimal.
Share Performance
Following the earnings projection, Air New Zealand shares opened 1.4% lower at NZ$0.7, reaching their lowest level since May 11, 2023.
Conclusion
Air New Zealand anticipates a challenging first half of fiscal 2024 due to softness in domestic travel demand and volatility in jet fuel prices. The company remains cautious but optimistic, closely monitoring fuel prices and addressing engine issues to minimize any negative impact on its financial performance.
