Air New Zealand has provided full-year earnings guidance. Photo / Mark Mitchell
Air New Zealand has provided full-year earnings guidance. Photo / Mark Mitchell
Air New Zealand expects a big cut to compensation it gets from engine manufacturers later this year.
The airline has been grappling with global maintenance requirements on the Pratt & Whitney and Rolls-Royce engines that power its Airbus neo and Boeing 787 Dreamliner fleets.
In an announcement to the NZX, Air New Zealand said engine maintenance timeframes provided by the manufacturers were still unpredictable.
“As a result, current expectations are that 11 aircraft are grounded, despite Air New Zealand securing seven additional leased engines and one further owned spare engine to stabilise the number of grounded narrow body jets.”
The airline said it was talking with engine manufacturers regarding appropriate levels of compensation for unserviceable engines.
It said it was also seeking accurate timeframes for engine returns.
“These discussions continue to be complicated, but Air New Zealand is exploring all possible avenues to ensure a fair outcome.”
Previously, the compensation framework included flexibility that allowed certain unusable engines to be treated as “unserviceable” for the purposes of compensation.
That short-term flexibility had now ended, the airlines said.
“As engine manufacturer compensation is based on the number of unserviceable engines, rather than the number of grounded aircraft, compensation received may not directly reflect the total number of aircraft on the ground,” the airline said today.
The airline expected compensation recognised in the second half to be about $35 million to $40m.
“This is substantially lower than the $94 million recognised in the first half, noting that approximately $30 million of the first half compensation related to a one-off settlement for other periods.”
The airline also updated the market on some other trading conditions.
“While Air New Zealand is currently benefiting from lower fuel prices, its operations remain configured to operate around eight to 10 more jet aircraft than are presently available,” it said.
“Adjusting the business to reflect fewer aircraft in the short-term introduces considerable complexity, especially as engines begin returning to service and capacity ramps up again.”
The airline said recent US tariff announcements added uncertainty to the broader demand environment.
“While no material changes in bookings or cargo have been observed, the company is closely monitoring the situation.”
Air New Zealand now expected earnings before tax for the 2025 financial year to be $150m to $190m.
“The range also assumes fuel at US$81 per barrel for the remainder of the financial year.”
That was down on the 2024 financial year where the airline’s underlying profit was $222m.
In early trading today, Air New Zealand shares were flat at $0.575.
United Airlines: It’s a weird world
Meanwhile, the airline with the world’s biggest fleet has offered two different profit outlooks, saying the economy was “impossible to predict this year with any degree of confidence”.
United Airlines delivered the investor update today, saying a single consensus no longer existed, and therefore the company’s expectation had become bimodal.
“Either the US economy will remain weaker but stable, or the US may enter into a recession.“
United said it was closely monitoring bookings, but trends had been stable.
A United Airlines Boeing 767 approaches Newark Liberty International Airport in New Jersey last week. Photo / Charly Triballeau, AFP
If the first scenario played out, the company would stay within the initial guidance range of US$11.50 to US$13.50 in adjusted diluted earnings per share.
But in the recessionary scenario, United modelled a fall in revenue.
“With that decrease in expected revenue, along with further capacity reductions from United but assuming no further cost relief from fuel, the company expects adjusted diluted earnings per share of US$7 to US$9.”
United also reported its best first-quarter financial results in five years, with record revenue of US$13.2 billion.
It said premium cabin revenue was up 9.2%, and revenue from economy class seats rose 7.4%.
United said it would remove some scheduled domestic capacity from the third quarter in response to the current demand environment.
“United is also continuing to make prudent adjustments to the utilisation rate of its fleet, including ongoing reductions in off-peak flying on lower demand days,” the airline said today.
United currently had 1018 mainline aircraft and 424 regional aircraft.
It operates dozens of Boeing 777, 767, 757 and 787 aircraft, and more than 200 737 Max aircraft.
It also has 159 Airbus A319 or A320 aircraft and 35 Airbus neo and XLR aircraft.
