Air New Zealand planes at Auckland Airport. File photo. Photo: Unsplash / Douglas Bagg
Air New Zealand is expecting to be back in the black for the first six months of the new financial year at least, as air travel continues to recover.
It's issued an upbeat earnings forecast for the first half on the back of strong forward sales over the first three months.
"Air New Zealand has continued to see strong forward sales over the first three months of the financial year, particularly for travel through to January 2023 and continues to operate approximately 70 percent of financial year 2019 capacity," it said in a release to the Stock Exchange.
It said assuming sales held up at current levels and jet fuel prices held steady at around US$130 a barrel then it expected earnings before tax and one off items between $200m and $275m.
That compared with last year's loss of $367m.
But the forecast came with plenty of caveats.
"The airline notes that fuel prices remain highly volatile and that this is one of many factors that have the potential to slow our recovery and significantly impact earnings."
"Additionally, demand in the second half of the financial year remains highly uncertain."
However, it warned that in addition to volatile fuel prices, there were plenty of other risks to its outlook including the threat of global recession, and the impact of inflation.
"The airline strongly cautions against extrapolating first half FY23 earnings guidance to the full year given the many uncertainties in the trading environment."
Air New Zealand shares rose more than 8 percent to a five-month high of 73.5 cents in an otherwise soft market.
An investment firm said the forecast was a "material improvement" on what has been expected by investment markets.
"Air New Zealand is benefiting from the delay in capacity returning post-pandemic and significant pent up demand resulting in high yields," Forsyth Barr analysts said in a note to clients.
"It is difficult to determine how long this favourable environment will continue as airlines progressively reinstate capacity, increasing competition and ramping-up the company's own cost base."
Before the announcement, the market consensus for the airline's full-year pre-tax profit has been $38m, with estimates ranging between an $18m loss and $81m profit.