Air New Zealand’s CEO has warned of a “challenging year ahead” for the airline, including job cuts, after a 61% drop in its profits amid aircraft groundings, supply chain issues, and competition from larger carriers.
The company retained a net profit for the 2024 financial year of NZ$146m ($91.5m), after taxation, but has had its earnings hit by a series of challenges in the last six months after recording one of its best ever results in FY2023, when it recorded a net profit of $412m.
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CEO Greg Foran said the company had taken action to minimise disruption caused by the grounding of some Airbus and Boeing aircraft as they wait for delayed engine maintenance work, including leasing three 777-300ERs, but would continue to be hit by industry-wide issues.
He said: “The challenges we are facing are not unique to Air New Zealand. Supply chain and aircraft delivery delays, growing costs and a shortage of labour in key areas like engineering are major issues facing many airlines across the global aviation industry.
“However, the reality is that while these issues continue to play out, Air New Zealand is expecting a challenging year ahead.”
Delays to aircraft maintenance were largely driven by issues with engine manufacturers Pratt & Whitney and Rolls-Royce, which are both struggling with supply chain issues and part shortages, leaving six Airbus neo aircraft with PW1100 engines and up to three Boeing 787 Dreamliners with Trent 1000 engines out of service for the airline through the year.
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By GlobalDataThe New Zealand flag carrier said that high inflation and strong competition from US airlines has also affected its performance during the financial year, with the former particularly affecting its non-fuel operating costs which increased faster than revenue.
The impact of increasing costs was particularly notable given the drop in profits despite a 7% increase in the airline’s operating revenue and an 11% increase in passenger revenue, driven by a 23% uplift in capacity led by its international long-haul network.
Foran was keen to assuage fears about the coming year though and outlined a number of steps being taken to reduce the impact of the expected challenges, including “ongoing discipline around our cost base” and a 2% reduction in employee headcount.
The news of the airline’s struggle with its fleet may comes as no surprise to some as it comes only a month after the company revealed it would be dropping its ambitious 29% emissions reduction target for 2030, citing difficulties with securing more efficient planes and sustainable aviation fuel.
In July, Foran said the airline would be withdrawing from the Science Based Targets Initiative as it realised that it may need to hold on to its existing fleet for longer than expected amid the industry’s manufacturing and supply chain issues.
As highlighted by Foran, the issues seen by Air New Zealand reflect a wider problem for the aviation industry, which has seen Airbus blame its aircraft delivery delays on supply chain issues and a series of damaging developments for Boeing’s high-profile production troubles.
The Kiwi airline’s decision to lease aircraft as a replacement for grounded planes also adds to a growing trend, coming shortly after the CEO of Ethiopian Airlines said his company had turned to the leasing market to cover delayed aircraft deliveries from Boeing.
