Our national airline says the half year loss was largely driven by global engine maintenance delays, slower than expected recovery in domestic demand, increasing aviation system costs and a weaker New Zealand currency

Air New Zealand (AIR) has reported an after-tax loss of $40 million for the first half of the year (compared with a profit of $89 million for the first half of 2025) and says the second half results could be even a little worse.

The company said the first-half result reflected the combined impact of ongoing fleet constraints, a slower recovery in domestic demand and rising costs, including persistently high aviation system inflation.

"Cost pressures have been further exacerbated by a weaker New Zealand dollar."

Air New Zealand said the loss was slightly higher than it had forecast "primarily reflecting a $13 million headwind from higher-than-assumed fuel prices in the second quarter". While the airline received $55 million in compensation from engine manufacturers for the first half, it estimates an additional $90 million of earnings could have been included within the result had the fleet operated as intended.

"The airline is in ongoing negotiations with engine manufacturers to improve certainty around engine return schedules and appropriate compensation," it said.

CEO Nikhil Ravishankar said the airline was undertaking a comprehensive review of all aspects of the business, "with the objective of returning the airline to sustained profitability through enhanced operational performance, growth and further cost transformation initiatives".

The airline said while capacity is expected to increase modestly in the second half, as aircraft return to service and new aircraft enter the fleet, the airline cautions that improvements in aircraft availability are unlikely to translate immediately into "earnings uplift".

"This is because widebody capacity cannot be operationalised into the schedule and sold at short notice," the company said.

"The primary constraint is uncertainty in the timing of aircraft and engine returns, which limits the ability to plan and sell additional flying with confidence. Disruption-related costs and inefficiencies also take time to unwind, including the return of leased aircraft and engines."

Air New Zealand said aviation system and supply chain cost pressures are expected to continue, reinforcing the importance of fit-for-purpose aviation sector settings that support sustainable connectivity and affordability for customers over time.

"Based on current trading conditions and assuming an average jet fuel price of US$85 per barrel for the second half, Air New Zealand expects second-half earnings to be broadly in line with, or modestly below, the first half. The outlook remains subject to material uncertainty, including engine return schedules, the timing and quantum of compensation, and continued volatility across key input costs and demand conditions.

"Compensation arrangements in respect of certain engines are yet to be agreed for the second half. Air New Zealand is in active negotiations with the relevant manufacturers. While the airline is working hard towards a fair outcome, the timing and quantum of further compensation remains uncertain, and this could materially impact full-year earnings," the airline said.