March 9, 2020 / 2:12 AM / 3 months ago

Air New Zealand withdraws 2020 earnings guidance due to coronavirus impact

SYDNEY/BENGALURU (Reuters) - Air New Zealand on Monday withdrew its full-year earnings guidance, froze hiring, offered unpaid leave to staff and said it would cut more capacity because of increased uncertainty over the duration and scale of the coronavirus outbreak.

FILE PHOTO: The logo for Air New Zealand is displayed at their office located at Sydney International Airport, Australia, June 20, 2017. Picture taken June 20, 2017. REUTERS/David Gray/File Photo

The airline said its network capacity would fall by 10% between February and June, including a 26% cut to Asia, 7% to Australia and 4% in the domestic market.

Air New Zealand shares fell as much as 4.4% in morning trade and are down 32% since the start of January.

Airlines around the world are experiencing a collapse in demand due to the coronavirus, which an industry body last week estimated could lower passenger revenue by as much as $113 billion this year.

Air New Zealand last month estimated its earnings for the financial year ending June 30 would take a NZ$35 million ($22.09 million) to NZ$75 million hit from the coronavirus, leading to profit before tax and significant items of around NZ$300 million to NZ$350 million.

Chief Executive Greg Foran said on Monday that it was increasingly clear the virus had created an unprecedented situation, making it difficult to predict future demand patterns and to provide earnings guidance.

“We have been continuously monitoring bookings and in recent days have seen a further decline which coincides with media coverage of the spread of COVID-19 to most countries on our network as well as here in New Zealand,” Foran said in a statement.

New Zealand has reported five confirmed cases so far. Rivals Qantas Airways Ltd and Virgin Australia Ltd have also cut back on flights between Australia and New Zealand because of a fall in international tourists.

Foran has offered to reduce his base pay by about 15%, while the company’s executive team will extend a freeze on its salaries that has been in place since May 2019, the airline said.

There will also be freeze on hiring for all non-critical roles, an offer of voluntary unpaid leave for operational staff and it will defer non-urgent capital spending.

“While we have already made swift adjustments to our operations, we are prepared to take further actions to address the ongoing demand impact of COVID-19,” Foran said.

($1 = 1.5803 New Zealand dollars)

Reporting by Jamie Freed in Sydney and Aby Jose Koilparambil in Bengaluru; additional reporting by Praveen Menon in Wellington; Editing by Kevin Liffey and Peter Cooney

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