Air New Zealand halts flights to Seoul amid coronavirus outbreak

Cornelia Mascio
Febbraio 26, 2020

Weaker forward bookings for travel on the Tasman and domestic networks have also emerged as a result, the company told the ASX.

But he said immediate steps had been taken to mitigate the impact of lower demand, including adjustments to capacity across the Asia, Tasman and Domestic networks.

The airline had also increased marketing spending in a bid to encourage New Zealanders to travel, both internally, as well as trying to boost trans-Tasman holiday-making.

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 NZ noted the situation remained uncertain but the net negative earnings impact of $NZ35m to $NZ75m was based on a current assumption of lower demand that would be mitigated by benefits from the capacity reductions and lower jet fuel prices.

"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".

The airline would release its 2020 Interim Results to the market on February 27.

The airline will continue to assess the appropriate level of capacity and other potential actions to reflect the changing demand environment.

The COVID-19 coronavirus has prompted Air New Zealand to reduce capacity into Asia by 17 percent from February to June as it braces for a $NZ35-75 million hit to its full-year earnings. It will also cut back flights to Hong Kong in response to falling demand.

The Kiwi airline said it will also cut Tasman capacity by 3 percent from March through May and domestic capacity by 2 percent across March and April, focused on Auckland-Christchurch and Auckland-Queenstown services.

While the situation is uncertain, based on our current assumptions of lower demand as well as the benefit of the announced capacity reductions and lower jet fuel prices, the airline now expects a net negative impact to earnings in the range of $35 million to $75 million as a result of coronavirus.

Air NZ said it expected earnings before other significant items and taxation to be between NZ$300 million ($190.2 million) and NZ$350 million for the year, down from the previous range of NZ$350 million to NZ$450 million it had forecast. This outlook excludes the impact of the new accounting standard for leases (IFRS 16). This would mean the world to us!

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