MIAMI – Air New Zealand (NZ) has today announced that it will be withdrawing its full-year 2020 earnings guidance, issued to the market on 24 February 2020, due to increased uncertainty surrounding the scale of the Covid-19 outbreak.

Recently, NZ reduced capacity on its Asia, Tasman, and Domestic networks, redeploying its fuel-efficient 787 Dreamliner fleet to drive operational efficiencies and, according to NZ’s website, using tactical pricing to stimulate demand on the impacted sectors.

While these steps help NZ mitigate the impact of reduced demand due to Covid-19, the carrier now believes that the financial impact is likely to be more significant than previously estimated, as is difficult to forecast future demand in what NZ CEO Greg Foran calls an unprecedented situation.

The CEO says that NZ has been “continuously monitoring bookings and in recent days has 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.”

Last week, the airline saw a significant drop in demand with a decline in bookings across its network. The further spread of Covid-19 to countries outside of China, including New Zealand, has driven a descending alteration in demand.

So far, NZ has had to extend the suspension of its Shanghai service until the end of April, consolidate additional services across the Tasman, Pacific Islands and Domestic network in March and April, reduce total capacity into Asia by 26 percent, and total overall network capacity by approximately 10 percent since the outbreak of Covid-19 started.

Summary of Air New Zealand’s response since the Covid-19 outbreak

  • Overall capacity reductions of approximately 10% across the network, including:
    – Asia capacity reduction of 26% through June, including the extension of Shanghai route suspension through April
    – Tasman capacity reductions of 7% through June
    – Pacific Islands capacity reductions of 6% through June
    – Reductions across the Domestic network of approximately 4%, with a 10% to 15% reduction in March and April
  • Various labor initiatives including a voluntary reduction in CEO pay, a hiring freeze for all non-critical roles and voluntary unpaid leave for operational staff
  • Deferral of non-urgent capital spend and any non-critical business activity
RouteCapacity Reduction %No. Flights
Domestic-4% 2,080 
Long Haul International-11% 460 
Short Haul International-7%680
Total Air New Zealand-10%3,220

As airlines across the industry grapple with the ongoing global health crisis, mitigating its effects is a priority for them, as they plane through these turbulent times by deferring non-urgent capital spend and non-critical business activity across operational and corporate functions.

Featured image: Air New Zealand Boeing 787-9.