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Air New Zealand faces challenges amid rising fuel prices

Air New Zealand (ASX:AIZ) has joined its trans-Tasman rival, Qantas, in warning of the increasing pressures resulting from higher oil and fuel prices. In addition to grappling with issues related to Pratt and Whitney engines, which will disrupt operations intermittently over the next two years, Air NZ is also contending with a weaker New Zealand dollar and escalating overall costs. As a consequence, the airline has decided not to provide guidance for the 2024 financial year.

Shareholders at the Air NZ annual meeting on Tuesday were informed that since the annual results reported on August 24th, the airline has encountered further adverse impacts on its cost base due to fuel prices and the weakened New Zealand dollar. These factors, coupled with passenger demand and the previously disclosed Pratt & Whitney global engine issues, will continue to be closely monitored. Given the ongoing uncertainty and volatility of these macroeconomic factors, the airline will refrain from providing guidance at this time.

This decision is made despite a seemingly promising outlook for the remainder of 2023, following what was described as a “particularly unique” 2022-23 period characterized by significant customer demand, constrained market capacity, and lower fuel prices in the latter half. Air NZ believes that the 2024 financial year will better reflect future financial performance.

Looking ahead to the first half of the 2024 financial year, customer demand remains robust across most markets, though there has been a recent softening in corporate and domestic demand. The airline acknowledges the uncertain economic environment and the potential impact of various factors, including increased international competition, volatile fuel prices, a weaker New Zealand dollar, ongoing wage inflation, and increased airport charges.

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