© Reuters. FILE PHOTO: The logo for Air New Zealand is displayed at their office located at Sydney International Airport, Australia, June 20, 2017. Picture taken June 20, 2017. REUTERS/David Gray/File Photo
By Echha Jain
(Reuters) – Air New Zealand said on Wednesday it expects its first-half earnings to be at the lower end of its forecast, due to weak travel demand and increased competition from U.S. carrier.
New Zealand’s flagship carrier had earlier forecast earnings before tax for the six months ended Dec. 31 between NZ$180 million ($110.34 million) and NZ$230 million.
For the same period last year, the carrier had reported a higher statutory profit before tax of NZ$299 million.
“Early signs of softness in domestic travel, particularly corporate and government travel, have continued, with late booking activity remaining weaker compared to the prior year,” the company said in a statement.
The company also expects the second half of the fiscal year to be “increasingly challenging”.
Its shares fell as much as 2.3% to NZ$0.645 by 2201 GMT, hitting their lowest level since Nov 30.
“The tight economic environment is having an impact on consumer’s discretionary travel decisions, which appears to be borne out by Air New Zealand’s tepid earnings guidance,” said Tim Waterer, chief market analyst at KCM Trade.
Inflation and high borrowing costs have hit the airline, which is also struggling with quality inspections of RTX’s Pratt & Whitney engines for a rare manufacturing flaw. Air NZ, however, said in October it sees a “nominal” financial impact from the inspections in the first half of 2024.
In September, RTX had estimated that it would have to pull 600 to 700 engines from Airbus A320neo jets for quality inspections between 2023 and 2026. Air New Zealand has 16 A320neo jets in its fleet of 106 aircraft.
Air New Zealand said it continues to address the ongoing impact from the engine issues on the business.
($1 = 1.6313 New Zealand dollars)