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Air New Zealand flags weaker earnings, citing Rolls-Royce engine issues

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By Reuters
Air New Zealand flags weaker earnings, citing Rolls-Royce engine issues
FILE PHOTO: An Air New Zealand Boeing 787-9 Dreamliner plane taxis at O'Hare International Airport in Chicago, Illinois, U.S. November 30, 2018. REUTERS/Kamil Krzaczynski   -   Copyright  Kamil Krzaczynski(Reuters)

(Reuters) – Air New Zealand expects much weaker earnings in its 2019 financial year, it said on Wednesday, citing higher costs after problems with some Rolls-Royce engines.

New Zealand’s flag carrier said it expects pretax earnings of between NZ$340 million and NZ$400 million (£178 million to £209 million) for the year to June 30, against initial guidance of NZ$425 million to NZ$525 million.

Air New Zealand is one of several Boeing 787 operators affected by maintenance issues on Rolls-Royce’s Trent 1000 engines. Problems with a deteriorating compressor in the engines had forced a number of airlines to ground flights.

Earnings will take a hit of about NZ$30 million to NZ$40 million from the resulting schedule changes, Air New Zealand said.

The carrier also said revenue growth has slowed, though lower jet fuel costs offer some relief.

“We are concerned with our latest outlook, which reflects the softer revenue growth we are seeing in the second half,” said Chief Executive Christopher Luxon, adding that the company has begun a review of its network, fleet and cost base to ensure the business is on a strong footing going forward.

The company said it will elaborate on annual guidance when it reports half-year results on Feb. 28. It expects to declare an interim dividend of 11 cents per share.

Separately, Air New Zealand said it carried 4.5 percent more passengers in December 2018 than it did a year earlier.

(Reporting by Ambar Warrick in Bengaluru; Editing by David Goodman)