Air New Zealand: Competition Heating Up

The good times didn’t last long for Air New Zealand. After a near-record pretax profit of NZD 585 million in fiscal 2023, conditions have deteriorated much more rapidly than we anticipated. Pent-up demand is largely exhausted, capacity constraints have eased, and competition is back. The cost base is up significantly and temporary engine maintenance requirements will weigh on profits. While the airline expects a first-half fiscal 2024 pretax profit of about NZD 180 million, it only guides to NZD 200 million to NZD 240 million for the full year, implying a near 80% fall in profit half on half. We lower our fiscal 2024 pretax profit forecast by 30% to NZD 226 million and cut our fair value estimate to NZD 0.80 (AUD 0.74), from NZD 0.90 previously.