Early engine checks won’t affect earnings, says Air NZ

Air New Zealand expects early engine maintenance checks will prompt some changes to its international flight schedule, but doesn’t anticipate a hit to earnings and affirmed annual guidance.

The shares fell 2.2 per cent to $3.305 yesterday after saying the early maintenance checks on the Trent 1000 engine powering its Boeing 787-9 Dreamliner fleet would have some impact on the international schedule.

Last month engine-maker Rolls Royce and regulator the European Aviation Safety Agency directed operators to carry out checks on certain engines every 300 cycles rather than the typical 2000 threshold.

The Auckland-based airline yesterday said it didn’t expect a material impact on earnings and affirmed annual guidance for 2018 pre-tax earnings to exceed the $527 million reported in 2017. Rolls Royce has said 380 engines globally are affected, including nine in the New Zealand carrier’s fleet.

“Air New Zealand expects there will be some customer and operational impact to its international schedule as a result of the checks,” general counsel Karen Clayton told the stock exchange. “However, the airline does not expect this global issue involving some of the Trent 1000 engines that power its Boeing 787-9 Dreamliner fleet to materially impact FY18 earnings and previous guidance remains unchanged.”

The airline said engines that have operated fewer than 300 cycles aren’t affected, nor are Trent 1000 TEN model engines.

Air New Zealand’s capital commitments stood at $1.38 billion as at December 31, including one Boeing 787-9 for delivery in the 2019 financial year, seven Airbus A321 NEOs and six Airbus A320 NEOs for delivery between 2019 and 2022, and 12 ATR72-600s for delivery between 2018 and 2020. It received two new Dreamliners in the six months ended December 31, taking that fleet to 11.