Air New Zealand has revealed a second earnings downgrade for the year. The airline said yesterday its June 30 year earnings could be up to $NZ60 million lower than forecast in March’s downgrade, thanks mainly to higher fuel prices.
Air New Zealand sparked a sell-off in airline stocks yesterday after it cut its 2018-19 forecast profit by $NZ100 million, blaming continuing problems with its Rolls Royce engines and softer travel domestic travel conditions.
Competition might have stiffened in the past year, but Air New Zealand has confirmed that the boom in airline profitability continues in this part of the world (and Qantas will add to that confirmation when it reports its 2016-17 figures on Friday).
Macquarie assesses the FY19 outlook has softened a little, as the airline is unable to pass on higher fuel costs to customers in the current demand environment. The stock offers a strong dividend yield, which is sustainable, given the balance sheet and recent deferrals of capital expenditure.
The investor briefing focused on the structural advantages that has allowed the airline to perform through the cycle as well as sustainable returns. Credit Suisse found nothing materially new to change its investment view.