Our national airline announces profit guidance suggesting the second half of the current financial year is proving to be a very bumpy one

Air New Zealand's (AIR) warning that the second half of the current financial year ending June 2024 is proving to be an extremely bumpy one.

It told the NZX in a statement that it's forecasting pre-tax earnings for the full year of between $200 million and $240 million.

That's comfortably less than half what our national carrier made in its stunning post-Covid bounce-back 2023 financial year, in which it made pre-tax earnings of $574 million, its second highest ever profit.

But the profit forecast for the current year is, to say the least, only half of it.

That's because in October 2023 the airline forecast pre-tax earnings for the first half of the year of $180 million to $230 million. In December it updated this to say that it expected half-year earnings of "around the bottom end" of that forecast.

And in the latest statement to NZX, Air New Zealand has said that the half-year result, to be released on Thursday, February 22, "will be consistent" with the updated forecast as of December.

So, if we assume a first half profit of in the region of $180 million - and a FULL YEAR profit of $200-$240 million, as Air New Zealand has now just forecast...well. Tough second half of the year.

The airline in its statement noted that "a number of economic and operational conditions have deteriorated further and are increasingly expected to have a significant adverse impact on its performance in the second half of the financial year".

Key factors included:

• The airline’s forward bookings profile which indicates that the increased capacity and further pricing pressure from US carriers is expected to more adversely impact the forward revenue performance for the remainder of the financial year.
• The cumulative impact of significant inflation on the cost base.
• Ongoing weakness in domestic corporate and government demand.
• Temporary cost headwinds to alleviate operational pressures and customer impacts from the previously disclosed unplanned Pratt & Whitney global engine maintenance requirements. These total approximately $35 million for the second half of the financial year and include the cost of short-term leased aircraft and significant additional contact centre resources.

"Air New Zealand will continue to assess the likely impacts and duration of these conditions and circumstances," the airline said.