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Analysts lower Air NZ's share price target

NZ Newswire logoNZ Newswire 26/01/2017 Edwin Mitson

© Shutterstock Analysts at Craigs Investment Partners have downgraded the share price target for Air New Zealand and warned its earnings before tax is likely to come in at the lower end of expectations.

Short haul passenger revenue for the airline between July and December last year fell 6.3 per cent, while long-haul passenger revenue had slumped 14.3 per cent.

In December the airline flew more people than a year earlier, but the percentage of seats sold on its flights fell 1.5 per cent on a year ago.

In a note to clients, analyst Matt Peek downgraded the target share price to $2.09 from $2.17, although it retained its 'hold' recommendation.

Shares of Air New Zealand are currently trading at $2.16, and have fallen 1.8 per cent on Thursday, underperforming the broader S&P/NZX 50 Index.

Peek notes that a number of new rival services have launched, competing with Air New Zealand on price, as well as fuel prices increasing.

The airline told investors that it was expecting profit before tax of between $400m-$600m for the 2017 full year when it reported record profits for 2016 in August.

Peek now expects profit before tax to be in the lower half of this range, because competition limits Air New Zealand's ability to recover the rising cost of fuel, causing a further deterioration in profit margins.

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