Air New Zealand lost $40m after tax in the first half of this financial year, which ended two months before the Iran war broke out.
Bowley and Lockwood in a note today said the airline had a balance sheet with plenty of capacity to absorb losses for the foreseeable future.
And it would not likely need to get the begging bowl out and beseech the Government to help, they added.
But that assumed no major deterioration in the fuel cost or broader trading environment, the analysts said.
Bowley and Lockwood expected the airline to keep losing money in the next financial year, starting July 1.
They said losses would be cushioned if engine maintenance issues were resolved quickly, and meaningful cost-cutting emerged from the current restructure.
The “reset” chief executive Nikhil Ravishankar announced after the first-half loss is expected to involve job cuts, and the Herald understands numerous senior managers are impacted.
“We expect a wide-ranging review, with further cost-out initiatives (on top of existing targets) likely balanced with disciplined network expansion,” the analysts said.
The analysts said the airline resumed hedging, and was 55% hedged for exposure to crude oil prices in the first half of next financial year.
That was up from 46% when the current Middle East crisis began, they said.
But the analysts said the airline faced another problem.
“Demand is weakening, particularly from New Zealand point of sale, given the fuel crisis impact on household travel budgets.”
Stats NZ today said domestic airfares were up 4.2% in April compared to March.
International fares were up 6.2%, Stats NZ said in the selected price indexes release.
Bowley and Lockwood said their airfare tracking analysis showed big March and April fare increases unwinding for both current and forward travel.
The analysts gave the airline an underperform rating today, as they did twice in March.
The airline yesterday said the Middle East war would cost it about $240m more than it had previously expected to pay for jet fuel.
It also said it had reduced overall capacity 3-5% since the Iran-Israel-US war started.
Air New Zealand said it had strengthened its funding flexibility in recent years.
That was because it had about $4 billion of available equity across aircraft it owned outright and those where its planes were worth more than any loans on them.
Ravishankar this morning told Newstalk ZB a recent drop in jet fuel prices from about US$200 to US$150 a barrel was helpful, but not enough.
John Weekes is a business journalist covering aviation. He previously covered consumer affairs, crime, politics and courts.
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