Air NZ expects underlying earnings for the first half of the 2023 financial year to be in the range of $295 million to $325m. Photo: AFP
Air New Zealand is upgrading its half-year earnings guidance on strong demand for travel and falling jet fuel prices.
However, the airline has warned it continued to face capacity constraints, which would affect pricing.
The airline now expects underlying earnings for the first half of the 2023 financial year to be in the range of $295 million to $325m - compared to the previous guidance range of $200m to $275m provided in September.
The updated range is based on current forward sales expectations and assumed an average jet fuel price of around US$127 a barrel for the six months ended December, it said.
The airline also assumed it would fly 75 percent of pre-Covid levels across the entire network in December, with domestic capacity running at just under 100 percent, short haul at about 85 percent and international at about 70 percent.
"Ticket sales over the past two months have remained strong as New Zealanders continue to book travel overseas and at home, and as the majority of our remaining international destinations re-open for passenger travel," Air New Zealand told the sharemarket.
It said fuel prices have moderated in recent weeks, with current jet fuel prices at about US$102 a barrel.
"While fuel prices are around 20 percent higher than pre-Covid levels at present, the six-month average has declined since the airline's last market update in September, adding almost $20 million upside to the guidance range."
Capacity constraints remained an issue for the airline and it would continue to affect pricing, it said.
"Air New Zealand is focused on ensuring operational reliability while also adding capacity to alleviate this pressure. Since February 2022 the airline has hired over 2200 employees into the organisation and welcomed two new [Airbus] A321 neo aircraft into the fleet."
The new aircraft would add an additional 200,000 seats per year into the domestic network and with the additional employees, it would help ease capacity constraints, it said.
However, Air New Zealand warned its recovery and earnings could be significantly affected by ongoing fuel price volatility, the risk of recession, inflationary pressures and rising costs.
Citing those reasons, the airline did not provide a full-year guidance.
