Air New Zealand upgrades profit forecast, but adds a warning
New Zealand’s national carrier has unveiled some positive profit news, and also delivered a warning about airfares.
Soaring airline earnings are spreading across the Tasman, as Air New Zealand says its profit this financial year will be higher than expected.
The Auckland-based carrier said on Thursday that its 2022-23 earnings would be at least $NZ20m ($18.2m) above its previous guidance, and added that economic pressures and increasing capacity entering the market meant airfares should fall from their current peaks.
“The airline has experienced stronger ongoing demand than usually observed at this time of the year, which is typically considered the airline’s off-peak period,” Air New Zealand said in a market announcement.
Declining jet fuel prices were also helping, and were consistently below the prices assumed in its previous earnings guidance in April, it said.
“The airline now expects earnings before other significant items and taxation for the 2023 financial year to be no less than $NZ580m,” it said.
“This compares with the prior guidance range given in April of $NZ510m-$NZ560m.”
Air New Zealand’s ASX-listed shares rose 1.4 per cent, or 1c, to 70c on Thursday.
The $2.4bn company’s share price has been relatively flat since January, but is up 26 per cent over the past year.
It has outpaced its larger rival, $11.3bn Australian carrier Qantas, which has recorded a 19.4 per cent share price gain since June 2022.
Air New Zealand said it expected to invest $NZ3.5bn on aircraft and retrofitting over the next five years.
“Looking ahead to the 2024 financial year, the airline remains mindful of the uncertain economic environment it is facing into,” it said.
“With more capacity entering the market in the coming months, fares are expected to moderate from the current peaks.” High fares have been boosting airlines’ profits around the globe, and Qantas told an investor day in May that airline seat capacity would not be enough to meet demand until the end of the decade.
Retiring Qantas CEO Alan Joyce said “demand is massively outstretching supply”, while his replacement and current chief financial officer Vanessa Hudson said the Qantas balance sheet had “never been stronger than it has in our history”.
Qantas has previously flagged a full-year underlying profit near $2.5bn, and it plans for Ms Hudson to take over in November.
Customers have been frustrated by the price of airfares, and Qantas and Virgin Australia were targeted by the Australian Competition & Consumer Commission this week in a report that said their market domination was hurting consumers.
“Jet fuel has almost halved in price and we’re hoping to see those reduced costs passed on,” ACCC chair Gina Cass-Gottlieb said. “In the current cost-of-living environment, we think that is why we’re starting to see some tailing off of what were very high levels of pent-up customer interest to fly, because price levels are just too high for many families to afford,” she added.
Meanwhile, Air New Zealand and Qantas have joined forces to attack plans by Auckland Airport to raise fees as part of a redevelopment. “The two major airline customers don’t agree with the scale and cost of the current plan,” they said in a statement.
Auckland Airport said it was one of the cheapest airports from which to operate.
Qantas shares closed down 1.9 per cent at $6.22.
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