New-Zealand’s major air-passenger carrier, Air New Zealand [ASX:AIZ] saw its share price rising around 3% on Thursday morning.
The share price movement came with the airline posting a positive update to its profit guidance, which it said was in part due to growing travel demand, and also on falling fuel prices.
Air NZ has raised its half year guidance for FY23 to between NZ$295 million to NZ$325 million, a significant increase on its previous guidance.
Even with its small win today, the New Zealand air travel company is still down on its full-year share price value by nearly 17% and is drifting 14% below its sector average.
Source: TradingView
Air New Zealand celebrates strong travel demand and dropping fuel costs
Shareholders were bidding the AIZ share price higher as the airline celebrated the opportunity to raise its half year earnings guidance for financial year 2023.
The opportunity to improve its expectations came off the back of growing demand in the travel industry, with many customers demonstrating restored confidence as pandemic fears continue to fade.
But that wasn’t the only reason the airline was able to boost its figures, AIZ also declared that a recent decline in jet fuel prices has managed to boost the airline’s financial recovery.
Current jet fuel prices are reportedly around US$102 a barrel, and AIZ is working off a US$127-barrel average to the end of December.
AIZ now believes it can expect earnings — before other significant items and related taxation — to reach the range of NZ$295 million to NZ$325 million for the first half of the financial year.
The air carrier’s prior guidance was initially forecast between NZ$200 million and $NZ$275 million.
Despite fuel prices still up around 20% to pre-COVID levels, the group said their gradual fall has added NZ$20 million to the upside of its guidance range.
Air NZ also expressed that it anticipates travellers to be flying around 75% of pre-COVID capacity levels across its operations in the month of December — domestic is expected to be running just shy of 100%, short-haul around 85% and international around 70%.
AIZ still cautious for FY23
The airline provided its increased profit guidance not long after Australian competitor Qantas lifted theirs.
It appears the air travel industry is again gathering confidence and momentum simultaneously, with COVID-19 limitations ebbing, more destinations reopening and, of course, the busy Christmas season already upon us.
However, the airline did acknowledge it is not completely out of the woods yet and concluded its update by stating that there are still many factors that could slow the airline’s recovery and impact its earnings.
These were listed as continuing fuel price volatility, recessionary risks, ongoing inflationary pressure and raised costs.
‘Capacity remains constrained’, AIZ stated. ‘Which will continue to impact pricing. Air New Zealand is focussed on ensuring operational reliability while also adding capacity to alleviate this pressure.’
With these factors in mind, AIZ decided against providing full-year guidance.
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