Savage headwinds for Air New Zealand

Air New Zealand's finance outlook has taken a hit with the natural disasters in Christchurch and Japan over the past month. Photo / Supplied

Opinion

It's been said that a week is a long time in politics, but the same could be said for a month in business.

In just four weeks, Air New Zealand's earnings outlook has turned to custard.

In that time, the airline has had to endure the impact on its business from the February 22 earthquake in Christchurch, a big spike up in fuel prices, and now the quake, tsunami and nuclear emergency in Japan.

Air New Zealand said on February 24, at its six-month results announcement, that it expected to be profitable in the second half.

But early this week the company said: "The financial impact of the Christchurch earthquake is more severe than expected then.

"Further, the recent tragic events in Japan will also impact revenue in that important market."

Based on current fuel prices and demand trends, the company does not expect to be profitable in the second half and its full year normalised earnings are expected to fall below $100 million.

These events have combined to hit Air New Zealand's share price, which closed yesterday at $1.13, compared with $1.40 just a month ago.

Recent events highlight the volatility of aviation markets generally and are perhaps a timely reminder that airlines are not for the faint hearted.

John Key's Government has made no secret of the fact that it is keen to sell-down some of its stake in the the majority-Government owned airline.

But timing is everything, and this year is looking less than ideal for Air New Zealand.