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Air New Zealand share price flat on market update

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Credit: Roger Schultz

The Air New Zealand Limited (ASX: AIZ) share price is at its opening trade level of $1.23 at the time of writing, after the company released a market update.

This compares to the S&P/ASX 200 Index (ASX: XJO) which is 1.1% ahead to 6007.5 points.

What did Air New Zealand say?

Air New Zealand provided a monthly investor update this morning. The airline advised that passenger numbers had fallen for July to 714,000 from 1.4 million in the prior corresponding period. Furthermore, revenue passenger kilometres also fell to $499 million from $3,215 million. Both metrics represent a decline of 56.9% and 86.8%, respectively.

Passenger load factor has plunged by 26.7%. Air New Zealand’s aircraft are running at 57.2% capacity compared with 83.9% last July.

While short-haul flights have been affected by the COVID-19 pandemic, the company’s long-haul flights have been almost non-existent with passenger numbers slumping 95.5% to just 9,000 for the month.

What did management say?

Air New Zealand CEO Greg Foran is wary about the pressure COVID-19 has impacted on the business. He said:

Physical distancing means we can only sell just under 50 per cent of seats on a turboprop aircraft and just 65 per cent on an A320 which also means we won’t be able to offer our lowest lead in fares until physical distancing measures are removed. This has put huge pressure on our business as it means we need to move some of our customers to other flights.

Outlook for 2021

Management did not provide any specific guidance earnings for 2021. However Air New Zealand is expected to make a loss as a result of travel restrictions.

The airline company remains focused on servicing domestic routes and chasing opportunities in the cargo space. Air New Zealand noted that its domestic business is highly encouraging and will look towards driving domestic tourism.

Air New Zealand will provide more context at its annual shareholders’ meeting on 29 September, which will include a discussion of the airline’s network focus, loyalty program enhancements, sustainability focus and digital priorities.

Should you invest?

In light of the trading update, I would stay away from Air New Zealand until we see a global recovery in international travel. I think there are safer opportunities in the ASX market that may have seen their share price beaten down, but don’t necessarily reflect its long-term growth prospects.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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