National carrier warns of $60m profit drop

Air New Zealand has slashed up to $60 million off forecast pre-tax profits in just two months as high fuel costs hit.

The airline has dropped guidance for earnings this financial year to $340m, the bottom of its previously announced range.

“Based on the current market environment and reflecting an additional approximately $25 million headwind from increased jet fuel prices (assuming an average price for the second half of the year of US$78 per barrel), we are targeting 2019 earnings before taxation to exceed $340 million,” Air New Zealand said.

That compares with a target range for operating earnings of between $340m and $400m given on March 28. In January, Air New Zealand warned profits would be lower than forecast following softer bookings and concern about future revenue.

Slowing domestic growth and levelling out in the number of international visitors had hit the airline. Its first-half net profit dropped by 34 per cent to $152m. Last year it was forecasting pre-tax profits of $425m to $525m for the current financial year.

Air NZ’s shares closed yesterday at $2.71. Earlier this month it said salaries for top executives have been frozen for the next year as the company battles costs.

The airline has under way a process to carve 5 per cent from overhead costs of support services in response to a dip in demand growth that emerged late last year. It has also been hit by rising operational costs, mainly fuel.