Air NZ shares fall to lowest level since 2022

Air New Zealand cut its annual profits estimates on Monday, noting financial headwinds and a cost-of-living crisis leading to weaker earnings in domestic and North American markets, sending the carrier’s shares to a near two-year low.

Shares of Air New Zealand (Air NZ) experienced a significant decline, dropping as much as 3.5% to NZ$0.550, marking their lowest level since July 1, 2022. If losses persist, the shares are poised for their worst day since March 7.

Revised Earnings Forecast for 2024

The airline now anticipates earnings before taxation for 2024 to range between NZ$190 million and NZ$230 million, a downward revision from the previous estimate of NZ$200 million to NZ$240 million. 

This adjustment reflects challenges in the North American market, where Air NZ faces intense pricing pressures due to increased capacity from U.S. carriers.

Ongoing Challenges

In February, Air NZ had already forecasted lower earnings for 2024, citing high engine maintenance costs as a contributing factor. The airline has been grappling with tough competition from U.S. rivals, particularly in pricing, which has strained its profitability.

Geographic Constraints and Competitive Landscape

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Air NZ’s struggles are exacerbated by its small domestic market and historically narrow profit margins. 

Managing director at Smoling Stockbroking, Brad Smoling, highlights the enduring geographic challenge for Air NZ in international competition. He predicts continued difficulties for the airline in the foreseeable future.

COVID-Related Impact

Adding to its financial woes, Air NZ expects a NZ$95 million hit from COVID-related credit breakage for the current financial year, further weighing on its earnings outlook.

Despite ongoing challenges, Air NZ remains committed to navigating the turbulent aviation landscape, albeit with a cautious eye on market dynamics and competitive pressures.