Air NZ reduces profit forecast to $200 million

12.30pm

Air New Zealand today pared back its full year profit forecast as the killer respiratory virus Sars continues to take its toll on international bookings.

The airline is now forecasting a full-year net profit before unusuals and tax of $200 million, down $30 million on earlier estimates.

Air NZ also said it was cancelling more flights to Asia in May and June as the virus tightens its grip on the region, deterring travellers.

The cancellations, when added to those announced last month, represent a 7 per cent reduction in total available capacity across the airline's international network (as measured in available seats per kilometre), Air NZ said.

Customers due to fly on the cancelled services will be rebooked on the next suitable flight.

Shares in Air NZ slipped a cent to 40c on the news.

Air NZ warned its full year earnings could deteriorate further if customers make late cancellations to bookings.

"These booking cancellations may result in short-term consolidation of flying to some markets and further cancellation of flights," the airline said.

The latest cancellations had been partially offset by strengthening forward bookings for its trans-Pacific and trans-Atlantic routes, Air NZ said.

Domestic booking levels also remained strong and cargo on the Asian routes was steady.

Air NZ said the impact on demand from the war in Iraq was lower then anticipated, resulting in a strong third quarter financial performance.

"However the current world airline industry environment clearly remains extremely volatile with profit realised to date being subject to downside risk," the airline said.

"This risk includes, but is not limited to, further decline in traffic, decline in yields, increased fuel prices and a decline in the New Zealand dollar."

The international services cancelled during May and June are as follows:

Japan:

- Auckland/Nagoya/Auckland -- all scheduled flights (three times per week) have now been cancelled from Thursday May 15 to June 30 inclusive, a total of 21 return flights;

- Auckland/Kansai/Christchurch/Auckland -- two of the six services per week have been cancelled (Sundays and Tuesdays ) most weeks from Sunday May 25 to Tuesday July 1, a total of 11 return flights;

- A daily service to Narita will remain, however, three of the five services will use smaller aircraft changing from a Boeing 747 400 aircraft (392 seats) to a Boeing 767 300 aircraft (230 seats).

Los Angeles:

- Auckland/Los Angeles flights cancelled on the following days:

Friday, May 23, Wednesday, June 11 and Sunday, June 15 (in addition to the five services previously announced March 31).

These Los Angeles services were introduced in anticipation of extra demand following the withdrawal of United Airlines from the route in April.

The Sars virus, or Severe Acute Respiratory Syndrome, has killed more than 200 and infected about 4000 people worldwide.

- NZPA