Air NZ could be hit by up to $75m as coronavirus hurts travel, migration

Author
Newstalk ZB, NZ Herald,
Publish Date
Mon, 24 Feb 2020, 9:34AM
Air New Zealand is cutting more of its Asian routes. (Photo / NZ Herald)

Air NZ could be hit by up to $75m as coronavirus hurts travel, migration

Author
Newstalk ZB, NZ Herald,
Publish Date
Mon, 24 Feb 2020, 9:34AM

The coronavirus outbreak is interrupting migration and travel, not just from China but from around the world.

Prime Minister Jacinda Ardern says New Zealand's China travel ban is likely to be extended as Iran, South Korea and Italy grapple with major outbreaks.

Immigration New Zealand's Beijing office is also likely to remain closed until further notice.

Immigration consultant Katy Armstrong told Mike Hosking that's causing a major processing backlog across the board.

"We've been told there's 13,400 cases on hand in Beijing that are having to be redistributed. Every day that goes on, there's going to be more cases."

Air New Zealand's earnings could be hit by up to $75 million, the airline warned today ahead of its half year result on Thursday.

The company has also temporarily suspended its services to Seoul, having already halted flights to and from mainland China.

"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 currently expects a net negative impact to earnings in the range of $35 million to $75 million as a result of coronavirus," Air New Zealand said in a statement.

"At the midpoint of the estimated range above, which is approximately $55 million, the airline is targeting earnings before other significant items and taxation to be in a range of approximately $300 million to $350 million."

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.

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.