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 chair Therese Walsh said based on the results the board has not declared an interim dividend, consistent with the airline’s Capital Management Framework.
"In the current environment, we are taking a prudent approach to distributions, prioritising balance sheet resilience and maintaining financial flexibility while operating conditions remain challenging and uncertainty persists across fleet availability, compensation and key cost inputs. We remain committed to disciplined capital management and to returning capital when conditions support it," she said.
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.
8 Comments
"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."
Yet, Jetstar can provide an equivalent main centre schedule across A/NZ reliably at ~ half AirNZ ticket cost. I've used them regularly for years & never had any significant problems.
AirNZ is similar to NZRail: expensive nostalgia funded by other peoples money.
Jetstar aren't operating on marginal routes like Air NZ are across the country. They tried and it didn't work for them. It's a service that the population requires much like other public infrastructure. Look at the other smaller airlines that have come and gone. Even Sounds Air have had to cut routes that aren't profitable. That option isn't as easily available to Air NZ.
I did say main centre routes. Yes, one problem for AirNZ is that theyre using main route travellers ticket costs to cross subsidise regional centres (politically correct bec govt is 51% shareholder). So, it's a lose lose for AirNZ as their main route tickets remain uncompetitive (except for taxpayer funded govt travel) while their regional planes are smaller customer numbers. Probably its time to admit that major airlines servicing regional centres aren't economically viable for those relatively small populations. That's what roads & ferrys are for.
Load factors are still high so there is demand there. If the company didn't have the grounded aircraft currently then they'd be near breaking even which wouldn't be as much of an issue given the economic slump the country is in currently. Airport/AVSEC charges have gone up a fair amount as well so there are a few factors outside of the companies control.
Privatising the airline won't make the routes cheaper as there's precedent now regarding what passengers are willing to pay even if they're not happy about it. They may just cut out a few marginal routes to help the bottom line. Less seats/routes and the same fares doesn't sound like much of a win for passengers.
Would be interesting to see which centres aren't breaking even. Whangarei and Napier would understand, but maybe some like Dunedin too?
Domestically Air NZ have squeezed all the blood they can out the domestic travel stone, to point of extortion. Air NZ have elevated their prices to such an extent people simply can not afford to fly.
Agree. Also economy shaky (less demand). AirNZ putting a lot of eggs in the US basket (Trump + strong US$) not helping their bottom line.
Correct, I keep looking at tickets for me and the family and when you are spending more on flying to other parts of the country than to Australia, it makes little sense. But airline travel has become so expensive in the CoL crisis, its one of the first things to be cut. Hell, I haven't actually flown anywhere in 4 years and was thinking of an overseas trip this year, but there's no way we can afford it. Same with most of my colleagues we have had a few conversations where we have all lamented the fact we can't fly anywhere these days for any reasonable price, so just drive to closer destinations for holidays etc instead.
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