It also cut some capacity and targeted opex savings, but these likely had a small impact given the scale of fuel cost increases, he said.<\/p>\n
Craigs lowered its FY26 pre-tax profit forecast from a loss of $134m to a loss of $427m. <\/p>\n
Looking further ahead, it expected the airline to lose $239m in the 2027 financial year, which will end on June 30 next year.<\/p>\n
Gardiner said an earlier end to the Middle East conflict could mean a higher level of earnings in FY27. <\/p>\n
The airline\u2019s balance sheet at least had some flexibility, he said, with $1.3 billion of liquidity.<\/p>\n
\u201cSo while we think there is some risk of [Air New Zealand] raising new equity in the future if the conflict carries on for an extended period, we don\u2019t think this is imminent and may be avoided completely.\u201d<\/p>\n
Since the war started, the airline\u2019s market capitalisation had fallen by about $410m, he added. <\/p>\n
Air New Zealand in March said it was 83% hedged against Brent crude for the second half of the 2026 financial year. <\/p>\n
But it said that as with most global airline peers, it was exposed to movements in the crack spread or jet fuel refinery margin.<\/p>\n
Craigs\u2019 price target was now $0.48, down from $0.60 previously. <\/p>\n
The airline\u2019s shares were trading at $0.42 early this afternoon. <\/p>\n
The price was $0.55 when the war started.<\/p>\n
\u201cThe share price appears to have factored in a conservative view of the duration of the conflict and the ongoing impact on prices\/crack spread, but there remains a high degree of uncertainty,\u201d Gardiner said today.<\/p>\n
He said jet fuel prices averaged about US$86 a barrel for January and February, with the crack spread at US$17.<\/p>\n
But current spot prices were about US$190 for jet fuel, with a crack spread of US$68.<\/p>\n
Gardiner said the airline\u2019s hedging was mainly for Brent crude and not the crack spread. <\/p>\n
Early this afternoon Brent crude was trading at US$113.8.<\/p>\n
The airline had some jet fuel hedges through January and February but has been exposed to crack spread volatility since then, he said.<\/p>\n
Gardiner said with the underlying Brent oil price also increasing, the airline would get some relief from its hedges.<\/p>\n
\u201cFrom discussions with management we understand no material additions have been made to the hedge position since the beginning of the Iran war.\u201d<\/p>\n
The airline faced a dilemma, he said.<\/p>\n
A Boeing 787-9 Dreamliner arrives from Auckland at JFK International Airport in New York. Photo \/ Charly Triballeau, AFP<\/p>\n
\u201cTo lock in prices now risks consigning [the airline] to a higher fuel expense for FY27 and potentially missing out on any benefits that could come from an end to hostilities and the reopening of the Strait of Hormuz. <\/p>\n
\u201cOn the flipside, it would help to avoid even greater losses that could come from a scenario where hostilities and an elevated jet\/oil price remain for longer.\u201d<\/p>\n
He estimated that if the airline locked in jet fuel at US$110 a barrel, that would equate to total fuel costs about $370m (or 25%) higher than in the 2025 financial year.<\/p>\n
Some schedule reductions helped reduce costs, as did modest fare increases, he added.<\/p>\n
\u201cWe are conscious this level of additional cost may be very hard to recover in the current tough economic environment where demand could be more sensitive to fare increases.\u201d<\/p>\n
Air New Zealand in March said for someone flying one-way in economy, its domestic flights had increased by $10, short-haul flights by $20 and long-haul flights by $90.<\/p>\n
Gardiner said Craigs already expected the airline\u2019s debt levels to climb over the next 18 months. <\/p>\n
The airline had reported reasonably strong operating statistics for March, he said, and that likely reflected having more Airbus A321s on short-haul routes.<\/p>\n
Previously, those aircraft were unavailable with engine issues<\/a> when there was a need to check the Pratt & Whitney PW1100G engines for microscopic cracks.<\/p>\n Gardiner said the airline was reporting strong demand domestically but capacity was only at about 87% of pre-Covid levels.<\/p>\n The headline on this article has been amended so the figure reflects the current financial year, given the uncertainty over the Iran conflict.<\/p>\n