Air NZ's shares dropped 6c or 2 per cent ot $2.67 in response to the downgrade.
The new guidance assumes jet fuel prices of US$65 a barrel for the rest of the financial year, compared to the US$75 average used in the earlier forecast.
Air New Zealand has been among those stocks hit by investor fears over the impact of the coronavirus outbreak. It closed at $2.73 on Friday and has dropped about 10.3 per cent since the virus started unnerving investors in late January.
Chief executive Greg Foran acknowledged the challenging environment but but was confident Air New Zealand was "well positioned" to respond to the 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," said Foran.
Air New Zealand has already suspended its mainland Chinese flight between Auckland and Shanghai until the end of next month and will restore more limited services when travel restrictions lift. It will also cut back flights to Hong Kong in response to falling demand.
Today, the airline announced that services to Seoul will be temporarily suspended from 7
March through the end of June.
Total Asia capacity will thereby reduce by 17 per cent for the months of February through June, while Tasman capacity is expected to be down 3 per cent from March through May.
It also highlighted reductions in Domestic capacity of 2 per cent across March and April, focused on Christchurch and Queenstown services to/from Auckland
Last week Auckland International Airport said coronavirus could hit its full-year profit by as much as $10m.
Australian rival Qantas Airways last week warned earnings would be hit by between A$100 million and A$150 million by the covid-19 outbreak. It responded by shrinking capacity across Asia, including a 5 per cent temporary reduction on trans-Tasman flights.
Air New Zealand said it had taken iImmediate steps have been taken to mitigate the impact of lower demand, including adjustments to capacity across the Asia, Tasman and Domestic networks.
The airline is also increasing market development investment to drive additional demand, specifically across its Domestic and Tasman markets. These actions, in addition to the reduced market price for jet fuel, will partially mitigate the impact of lower demand, however overall earnings for the 2020 financial year will be adversely impacted, it said.
