\u201cAir New Zealand is a smaller airline than it was pre-Covid, but its cost base is bigger,\u201d he added.<\/p>\n
He said Morningstar now forecast a fiscal 2026 pre-tax loss of $125m, from a pre-tax profit of $94m a year before.<\/p>\n
Forsyth Barr\u2019s Andy Bowley and Hugh Lockwood also said consistent cost pressures were a major drag on the airline.<\/p>\n
They forecast a $119m full-year loss before tax, with the airline losing $60m in the second half.<\/p>\n
Bowley and Lockwood said the airline last week delivered a near-term earnings outlook worse than previously anticipated.<\/p>\n
The airline said it expected second-half earnings to be broadly in line with or modestly below the first half.<\/p>\n
The first-half loss was likely to be repeated through 2H26, Bowley and Lockwood said in a note.<\/p>\n
But they said the airline was \u201cfacing compounding challenges that will eventually recede and should provide a more profitable outlook from FY28\u2033.<\/p>\n
The shape of any turnaround would depend on the number and scale of changes emerging from the strategic review, they added.<\/p>\n
What does Air NZ spend its money on?<\/p>\n
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 \u201cbiggest cost bucket\u201d. <\/p>\n
The airline spent $1.7 billion on labour in the previous financial year, up 5%. <\/p>\n
The 2025 annual report said the airline had 11,700 fulltime equivalent employees.<\/p>\n
The second-biggest cost was fuel, at $1.48b last year.<\/p>\n
Air New Zealand last week said cost inflation was outpacing the Consumers Price Index, with domestic aviation system costs a major culprit.<\/p>\n
It said landing charges<\/a> were up 64% from 2019, engineering materials cost 45% more, air navigation charges were up 37% and labour costs were up 31%.<\/p>\n Chief executive Nikhil Ravishankar<\/a> last week told the Herald the airline was shifting to scenario planning as part of the reset.<\/p>\n The airline said fleet constraints were adversely impacting cost per available seat kilometre (Cask).<\/p>\n It said Cask was also up because of big increases in supplier costs, and inefficiencies linked to ongoing engine constraints<\/a>, as well as unfavourable foreign exchange.<\/p>\n \u201cWhile 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,\u201d Air NZ added.<\/p>\n That was because widebody capacity could not be reintroduced into the schedule and sold at short notice.<\/p>\n The airline said Cask was up because Civil Aviation Authority charges were up 145% and Aviation Security charges were up 66% this year alone.<\/p>\n Dreamliner, 777 refit projected costs<\/p>\n 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.<\/p>\n The Boeing 787 Dreamliner retrofit<\/a> was expected to be completed by the end of this calendar year.<\/p>\n The airline\u2019s other widebody aircraft, the 777-300ER, are expected to get a \u201crefresh\u201d starting early next calendar year.<\/p>\n The spruce-ups will cover 14 Dreamliners and seven 777s at a total cost of about $450m to 2028.<\/p>\n 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.<\/p>\n Air New Zealand shares are trading at 55c and are down 12% over the past year.<\/p>\nAn Air New Zealand Boeing 777 at Victorville in the Mojave Desert during the Covid-19 pandemic. Photo \/ Supplied<\/p>\n