Air New Zealand’s share price has slipped marginally after it sent a shot across investors’ bow warning “a number” of factors it expected to hamper performance in the second half of its financial year.

The airline is reporting its interim results to December 31 on Thursday but prefaced them on Monday by telling the market economic and operational conditions had deteriorated further and it expected them to have a “significant adverse impact” on its performance in the next six months.

By midday, Air NZ’s NZ stock exchange (NZX) share price dropped 0.78 per cent to 63c, with nearly $950,000 worth of shares changing hands in 228 trades.

The company said it expected the second half of the year to be “increasingly” challenging given the ongoing impact of engine maintenance requirements, economic and inflation risks and early signs of softness in domestic demand.

Specifically, Air NZ’s bookings profile indicated increased capacity and further pricing pressures from United States carriers were expected to affect revenue performance more adversely for the rest of the year.

It also expected to have to spend $35 million over six months to alleviate operational pressures and customer impact from the Pratt and Whitney global engine maintenance requirements. Changes to the maintenance schedule mean up to four Air NZ planes will have to be grounded at a time.

With an average jet fuel price of US$105/bbl – the fuel is measured in “blue barrels”, or 42 gallons – (NZ$171.18) over the second half, the airline was forecasting full-year earnings before tax to be in the range of $200m and $240m, which included $20m currently assumed for the Covid-related credit breakage.

Not surprising

Craigs Investment Partners adviser Peter McIntyre said the warning was not surprising.

All the factors affecting the airline’s performance were common for other airlines as they ramped up operations post-Covid.

“It’s just how airlines tend to operate; it’s never plain sailing.”

Investors would be watching to see what happens with Air NZ’s dividend flow on Thursday, McIntyre said.