Yesterday, its rival Qantas reported a more than $1.5 billion profit after tax.
Air New Zealand said capacity, measured in available seat kilometres (ASK), was up 1.3% across the network as some of its aircraft returned to service.
But capacity reductions because of extremely high fuel prices countered that.
With Air NZ not paying a dividend, the Government misses out on $41.2m.
Whopper fuel bill
The airline said the Middle East conflict increased its jet fuel bill by about $328m compared to what it expected going into the second half.
It said even with hedging, the fuel bill was $205m higher than anticipated.
The airline said the jet fuel price took a $135m bite out of the pre-tax result after fare hikes and cuts to some services.
Even as some aircraft returned to service and several engine issues were resolved, it said ongoing Rolls-Royce Trent 1000 and Pratt & Whitney PW1100 engine issues impacted the result by about $190m.
It said that amount was because of lost capacity, additional lease and engine costs, lower fleet use and operating inefficiencies.
The Trent 1000 is used on 787-9 Dreamliners and the Pratt & Whitney engine on the airline’s smaller Airbus A320 family aircraft.
But Air NZ said maintenance costs this year should be $50m to $100m less than in the last financial year.
The airline today also blamed aviation system costs, which it said had risen at more than twice the rate of inflation since 2019.
Airlines pay fees or levies to entities including airports, the Civil Aviation Authority and air traffic controller Airways NZ.
“Air New Zealand and our customers’ share of these aviation system charges across New Zealand and the offshore ports we fly to was $1.2b in 2026, a price increase of $142m on 2025,” the airline said today.
“Aviation system costs continue to rise well above inflation, with airport charges expected to increase by upwards of 10% at some ports during the 2027 financial year.”
Air NZ chief executive Nikhil Ravishankar said the airline had responded decisively to prolonged engine constraints and the sharp increase in fuel prices, while improving the airline’s operational performance.
“Given the price sensitivity of air travel, airlines globally have not been able to recover the full increase in fuel costs.”
He said the airline was making progress on what it could control, including improving on-time performance from 77.5% last year to 84% in the first six months of this calendar year.
Cargo revenue was down 0.6% to $484m, with higher fuel costs blamed.
The airline said high jet fuel prices affected freight demand and caused customers to manage their operations and volumes in response.
Operating costs were up 11.8%, with fuel costs again cited as the culprit.
The airline said it expected this financial year to be “both a transition and recovery year” and said operational performance would improve even as it still faced high fuel prices.
On tourism, Ravishankar said the airline was seeing encouraging inbound demand, with strong forward bookings into New Zealand.
“This is a positive signal for tourism and for the country more broadly.”
Tim O’Loan, Amova Asset Management research analyst, said today’s result was broadly what he was expecting.
“Engine-related disruptions have been hanging over the business for a long time, and there now seems to be genuine progress on getting the fleet back to a more normal operating position.”
The biggest challenge was still fuel prices, O’Loan said.
Volatile times
Air New Zealand in late February reported a $59m half-year loss before tax.
The airline started contending with volatile jet fuel prices after the Iran-Israel-US war broke out.
It suspended its previous earnings guidance on March 10 and also announced airfare increases that month.
In April, Forsyth Barr suggested Air New Zealand would lose $229m in the 2026 financial year and $148m in FY2027 before turning a profit.
In May, the airline announced numerous cuts to domestic and international services for travel between July 27 and October 24.
Late last month, Forsyth Barr forecast a $350.2m pre-tax loss for the airline and said the consensus forecast from market analysts was a $364.4m loss.
Before the result, Forsyth Barr analyst Andy Bowley said the airline’s key challenges apart from soaring jet fuel costs included sluggish demand in New Zealand.
John Weekes is a business journalist covering aviation. He also has experience covering consumer affairs, crime, politics and courts.
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