Rajasik Mukherjee
(Reuters) – Air New Zealand cut its full-year profit forecast on Monday, citing economic difficulties and a cost-of-living crisis that has slashed revenue in its domestic and North American markets, sending the airline’s shares to a near two-year low.
Air NZ shares fell 3.5% to NZ$0.550, their lowest level since July 1, 2022. Stocks were poised for their worst day since March 7 if losses persisted.
New Zealand’s flag carrier now expects pre-tax profits to be between NZ$190 million and NZ$230 million in 2024, up from a previous estimate of NZ$200 million to NZ$240 million.
“North American performance continues to be impacted by very competitive pricing pressures as the market adjusts to the significant capacity added to the New Zealand market by US carriers,” the carrier said in a statement.
Earlier in February, the company forecast lower profits in 2024 and noted the impact of high engine maintenance costs.
The airline is struggling to cope with stiff competition from its US counterparts on price terms.
“They have a very small domestic market and their profits are always very small. Air NZ’s geographic challenges in international competition will never change,” said Brad Smoling, managing director of Smoling Stockbroking.
“I think they will continue to face a very difficult challenge in the days ahead.”
Air New Zealand said its profits would also fall by NZ$95 million this financial year due to the COVID-related credit crunch.
($1 = 1.6964 New Zealand dollars)