Air New Zealand share price slumps as earnings forecast slashed

Air New Zealand's share price slumped by up to 14 percent today after an announcement its earnings forecast was slashed.

The airline is putting the forecast drop down to engine issues, the slowing of the domestic leisure market and inbound tourism and rising fuel costs.

Nine of Air New Zealand's 787 aircraft were affected by Rolls Royce engine issues in early 2017, forcing countless flights to be rescheduled.

The airline says this cost them up to $40 million.

Air New Zealand CEO Christopher Luxon said those had dramatically affected the company's earnings forecast.

"Because of that, we're now expecting earnings before taxation of $340-400 million for the financial year."

The earlier prediction was between $425-$525 million.

Air New Zealand wouldn't be interviewed today, instead it provided media with a prepared video from Mr Luxon.

"We're also facing the challenge of a fuel bill that's forecast to be $180 million more than last year," he explained.

"We're seeing this particularly in our domestic leisure and also our inbound international tourism markets."

Flight Centre says it's also seen the trend.

Victoria Courtney, Flight Centre's General Manager of Products says more Kiwis are "travelling to longer haul destinations".

"More carriers, more routes that have opened up to the New Zealand market and the fares being incredibly affordable at the moment" are all contributing factors.

Aviation commentator Peter Clark says it'll be a sore spot for the national carrier.

"Looking at profitability on some of those routes, I think you might see some cut backs on some of those which could possibly lead to some job cuts if they cancel certain routes and change the routing."

Air New Zealand says there may be new destinations on the cards and more flights to some existing ones, the details of which remain under wraps until the company's interim result announcement at the end of next month.


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