“Unit revenue growth has accelerated, particularly on long-haul services, helped by reduced industry capacity.”
They said the airline’s passenger revenue was up 12% in the first quarter, compared with a year earlier.
But they also estimated Air NZ was spending about $6.8m a day on fuel, compared with $5.6m at the start of the financial year.
“We assume some moderation of current fuel prices, but lift our annual cost assumption to [about] $2.3 billion,” Bowley, Lockwood and Visser said.
They said the airline’s overall load factor was up, reaching 84.8%, and overall capacity was at 91% of pre-Covid levels.
A taxpayer bailout was deemed unlikely to be needed.
“We don’t foresee any liquidity issues in the meantime or a need to raise additional equity, but continue to expect the company to defer capex where possible in order to prudently manage the balance sheet.”
Oil prices soared after the Iran-Israel-US conflict started on February 28.
The “crack spread” or premium paid for refined fuel was still high, the analysts said.
Bowley, Lockwood and Visser also discussed hedging – locking in or protecting against future fuel prices.
They said the airline had not embarked on any additional hedging over the past two months.
“Like airlines around the world, Air New Zealand is facing significant pressure from high jet fuel prices,” Air NZ chief financial officer Kris Cudmore said.
“Jet fuel now costs more than twice what it did before the war, while Stats NZ figures show petrol and diesel prices increased by 26% and 56% respectively between February and September.
“We continue to manage our financial position carefully in what remains a challenging operating environment.
“As outlined in our latest market update, we had hedged 80% of our Brent crude exposure and 20% of our jet fuel crack spread exposure for the first half of the 2027 financial year, as at 30 September.”
The airline said it did not comment on individual analyst forecasts, as those reflected analyst assumptions about future market conditions.
The International Air Transport Association’s latest jet fuel price monitor said the global average price of US$192.44 (about $338) a barrel was more than double the price a year earlier.
Air New Zealand recorded a $336m pre-tax loss in the last financial year.
After that, Prime Minister and former Air NZ chief executive Christopher Luxon rebuked the airline for “a very poor result”.
That prompted Luxon’s predecessor Rob Fyfe to chastise the PM for wading into the company.
Air NZ chief executive Nikhil Ravishankar in August said the airline should make a profit this financial year if jet fuel prices stay within its predictions.
Overseas, Reuters on Friday reported resilient passenger traffic and sharply higher fares had not been enough to fully offset soaring fuel costs for US airlines.
“The surge in jet fuel expenses has pressured margins and prompted these companies to take a more cautious view on profit and capacity growth.”
When are flights cheaper?
Meanwhile, the Forsyth Barr analysts said domestic flights booked 90 days ahead of travel were 47% cheaper than those booked in the week of travel.
People booking two months ahead of travel were likely to pay just over 40% less than those booking the same week they travelled.
John Weekes is a business journalist covering aviation. He also has experience covering consumer affairs, crime, politics and courts.
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