Air New Zealand last week said costs from engine issues were a drag on near-term earnings.
Hewitt said the $59m pre-tax loss was a sharp downturn from the $144m pre-tax profit a year earlier.
“Air New Zealand is a smaller airline than it was pre-Covid, but its cost base is bigger,” he added.
He said Morningstar now forecast a fiscal 2026 pre-tax loss of $125m, from a pre-tax profit of $94m a year before.
Forsyth Barr’s Andy Bowley and Hugh Lockwood also said consistent cost pressures were a major drag on the airline.
They forecast a $119m full-year loss before tax, with the airline losing $60m in the second half.
Bowley and Lockwood said the airline last week delivered a near-term earnings outlook worse than previously anticipated.
The airline said it expected second-half earnings to be broadly in line with or modestly below the first half.
The first-half loss was likely to be repeated through 2H26, Bowley and Lockwood said in a note.
But they said the airline was “facing compounding challenges that will eventually recede and should provide a more profitable outlook from FY28″.
The shape of any turnaround would depend on the number and scale of changes emerging from the strategic review, they added.
What does Air NZ spend its money on?
The Forsyth Barr analysts said Air New Zealand would have to absorb $130m-$150m in non-fuel cost inflation this financial year with labour the “biggest cost bucket”.
The airline spent $1.7 billion on labour in the previous financial year, up 5%.
The 2025 annual report said the airline had 11,700 fulltime equivalent employees.
The second-biggest cost was fuel, at $1.48b last year.
Air New Zealand last week said cost inflation was outpacing the Consumers Price Index, with domestic aviation system costs a major culprit.
It said landing charges were up 64% from 2019, engineering materials cost 45% more, air navigation charges were up 37% and labour costs were up 31%.
Chief executive Nikhil Ravishankar last week told the Herald the airline was shifting to scenario planning as part of the reset.
The airline said fleet constraints were adversely impacting cost per available seat kilometre (Cask).
It said Cask was also up because of big increases in supplier costs, and inefficiencies linked to ongoing engine constraints, as well as unfavourable foreign exchange.
“While there are some early signs of improvement in the outlook for engine returns in the second half, the financial benefit will take longer to flow through,” Air NZ added.
That was because widebody capacity could not be reintroduced into the schedule and sold at short notice.
The airline said Cask was up because Civil Aviation Authority charges were up 145% and Aviation Security charges were up 66% this year alone.
Dreamliner, 777 refit projected costs
An Air New Zealand Boeing 777 at Victorville in the Mojave Desert during the Covid-19 pandemic. Photo / Supplied
In its results last week, the airline said forecast aircraft capital expenditure excluding retrofits would be less next year than this year, and smaller still in 2028.
The Boeing 787 Dreamliner retrofit was expected to be completed by the end of this calendar year.
The airline’s other widebody aircraft, the 777-300ER, are expected to get a “refresh” starting early next calendar year.
The spruce-ups will cover 14 Dreamliners and seven 777s at a total cost of about $450m to 2028.
The airline expected a capacity increase this half of 3-4%, subject to better engine reliability on Dreamliners and Airbus A320neos, and the delivery of a General Electric-powered Dreamliner next month.
Air New Zealand shares are trading at 55c and are down 12% over the past year.
John Weekes is a business journalist covering aviation and court. He has previously covered consumer affairs, crime, politics and courts.
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