Qantas and Virgin Australia shares are losing altitude after engine troubles and a weaker tourism market rocked Air New Zealand's earnings forecast.
Air New Zealand's ASX-listed shares dropped more than 13 per cent to $2.73 by 1315 AEDT on Wednesday after the Kiwi carrier flagged an expected softening across both domestic and inbound New Zealand travel.
Qantas dropped 5.6 per cent to $5.56 in the slipstream, while shares in Virgin Australia were also down 1.35 per cent at 18.25 cents.
Listed travel agents Webjet and Flight Centre also dipped on the news.
Air New Zealand cut its full-year earnings forecast to between $340 million and $400 million, down by as much as 24 per cent on a weaker tourism market and costs related to its Rolls-Royce Trent 1000 engines.
"We are concerned with our latest outlook, which reflects the softer revenue growth we are seeing in the second half," chief executive Christopher Luxon said.
The company said the Rolls-Royce engine durability issues affecting its 747 aircraft could cost between $30 million to $40 million.
Partially offsetting this was a drop in the assumed average jet fuel price for the year.
The company said will report half-year results on February 28, when it expects to declare an interim dividend of 11 cents.
In June last year, Qantas and Air New Zealand signed a codeshare agreement on 115 domestic routes to shorten connection times.
Previously, Air New Zealand had an alliance with Virgin.
