Air New Zealand (ASX:AIZ) has provided its earnings guidance for FY25, anticipating a substantial drop in compensation from engine manufacturers, despite an increase in grounded aircraft.
The airline, which had previously withheld full-year guidance due to uncertainty surrounding the number of grounded aircraft and related compensation, now projects earnings before taxation to range between NZ$150 million ($139.5 million) and NZ$190 million ($176.7 million).
The airline's groundings are linked to global maintenance requirements for Pratt & Whitney and Rolls-Royce engines powering its Airbus neo and Boeing 787 Dreamliner fleets.
While Air New Zealand has secured additional leased engines to stabilise the number of grounded narrow-body jets, unpredictable engine maintenance timeframes remain a challenge.
In the first half of the year, compensation was based on the flexibility to classify certain engines as unserviceable, even when retained "on-wing" for tasks like repositioning stored aircraft.
This flexibility has now ended, meaning only engines "off-wing" for maintenance will trigger compensation.
As a result, compensation for the second half of FY25 is expected to be between NZ$35 million ($32.6 million) and NZ$40 million ($37.2 million).
Despite benefiting from lower fuel prices, Air New Zealand faces complexities as it adjusts operations to accommodate fewer aircraft in the short term.
Ongoing uncertainty, including recent US tariff announcements, further complicates the demand environment.