Air New Zealand (ANZ) has cut its earnings forecast citing further increases in jet fuel prices.
In February the national carrier forecast that earnings before tax and unusual items would be higher this fiscal year than 2007’s but today it says increases in jet fuel prices in the past few weeks means now “the company will not achieve that outcome”.
For the 2007 fiscal year the airline posted an operating surplus - before tax and unusual items – of NZ$268 million.
In today’s statement it says 2008 earnings before tax and unusual items will be between NZ$200 and NZ$220 million ($160 million and $175 million).
“The price of crude oil has continued its unprecedented rise in March” plus “the price differential between crude oil and jet fuel …has widened significantly”, it says.
Over the past two years the differential has averaged $15 per barrel but currently the difference is $25 per barrel, says ANZ.
It does hedge to cope with rises in crude oil prices but hedging “does not insulate against crack spread volatility”, it says. Crack spread refers to the difference between jet fuel and crude oil prices.
Besides changing its earnings forecast, another consequence of the higher fuel prices is that the airline might have to further review its network, cost base and pricing, it adds, without elaborating.
Yesterday crude oil prices rose above $119 a barrel, a new high. Market analysts attributed the latest price rise to a further depreciation in the US dollar, a potential strike by oil refinery workers in Scotland and attacks on oil pipelines in Nigeria, a large African oil producing nation.
ANZ’s fiscal year is the 12 months ending 30 June.
Source: Air Transport Intelligence news
Source: FlightGlobal.com
