Air New Zealand suspends earnings guidance as coronavirus takes toll

Air New Zealand has been forced to dump the full year profit guidance it issued only two weeks ago and its CEO is taking a pay cut.

Air New Zealand says it has made significant cuts in network capacity.

Air New Zealand CEO Greg Foran will take a voluntary $NZ250,000 pay cut as part of a raft of measures announced by the airline in response to the worsening impact of coronavirus.

Less than a month after issuing its half-year result and trading outlook, the kiwi carrier has withdrawn its full year guidance of an expected $NZ300m to $NZ350m in earnings before tax.

A statement issued by Air New Zealand on Monday said it now believed the financial impact of COVID-19 would be more significant than previously indicated.

“With the situation evolving at such a rapid pace, the airline is not in a position to provide an earnings outlook to the market at this time,” said the statement. “An update on earnings expectations will be provided when appropriate.”

The airline has already taken numerous steps to mitigate the impact of the health crisis including reducing capacity to Asia, Australia and within New Zealand.

But over the past week, additional softness in demand due to the further spread of COVID-19 has created an “unprecedented situation”.

Mr Foran said it was difficult to predict future demand patterns.

“We have been continuously monitoring bookings and in recent days have seen a further decline which coincides with media coverage of the spread of COVID-19 to most countries on our network as well as here in New Zealand,” said Mr Foran.

In response further capacity reductions had been applied across the network including the suspension of Auckland-Shanghai services till the end of April.

The cuts meant total capacity into Asia was reduced by 26 per cent, and total overall network capacity down 10 per cent.

In addition, Mr Foran volunteered to reduce his base pay of $NZ1.65m by approximately $NZ250,000.

The executive team would extend a salary freeze in place since May 2019, and a hiring freeze had also been adopted.

“Air New Zealand is a strong and resilient business operated by a world-class team with deep experience having navigated prior shocks to our business and industry,” said Mr Foran who only began as CEO in early February.

“While we have already made swift adjustments to our operations, we are prepared to take further actions to address the ongoing demand impact of COVID-19.”

Qantas announced further capacity cuts on Friday, affecting services to Japan and Auckland.