Air New Zealand says coronavirus could cost it up to $75 million

Services to Seoul will be suspended until June.
Services to Seoul will be suspended until June. Photo credit: Getty Images

Air New Zealand provided an update on the estimated cost of coronavirus on the airline's earnings for the 2020 financial year, saying it could lose up to $75 million.

In a statement, the airline said its revenue would be "adversely impacted" by softer demand for travel to and from Asian destinations as well as weaker forward bookings for travel across the Tasman and domestically within New Zealand.

The airline has taken some steps to mitigate the impact of the drop in demand including reducing capacity to Asian destinations, and effective immediately services to Seoul will be temporarily suspended until the end of June.

Temporary changes: 

  • Total Asia capacity will reduce by 17 percent for the months of February through until June
  • Tasman capacity reductions of 3 percent from March through May
  • Reductions in domestic capacity of 2 percent across March and April, focused on Christchurch and Queenstown services to and from Auckland.

It's expected the current coronavirus situation will negatively impact the airline's earnings in the range of $35 million to $75 million, although that amount could change along with the situation.

The airline is targeting earnings before other significant items and taxation to be in a range of approximately $300 million to $350 million. 

 Air NZ's new Chief Executive Officer Greg Foran says he is confident it's well positioned to deliver the best result under these conditions. 

"Air New Zealand is a resilient business and we have demonstrated the ability time and again to respond quickly to changing market conditions. We have a highly capable and experienced senior leadership team who have dealt with challenges such as this before and I am confident that we will effectively navigate our way through this," Foran said.

The airline will release its 2020 interim results to the market on February 27.

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