Air New Zealand has posted a NZ$59 million (around AU$49.6m) loss before taxation for the first half of FY26, as global engine maintenance delays, softer domestic demand and mounting system-wide cost pressures weighed on performance.
The national carrier reported a net loss after taxation of NZ$40 million and EBITDA of NZ$347 million for the six months to 31 December 2025. The result compares with earnings before taxation of NZ$144 million in the prior corresponding period and sits slightly outside the airline’s October 2025 guidance range of a NZ$30 million to $55 million loss.
The variance was primarily driven by a NZ$13 million headwind from higher-than-assumed fuel prices in the second quarter.
Air New Zealand said the result reflected the combined impact of ongoing fleet constraints, a slower-than-expected recovery in domestic demand and rising costs, including persistently high aviation system inflation. A weaker New Zealand dollar further exacerbated cost pressures.
While the airline received NZ$55 million in compensation from engine manufacturers during the half, it estimates a further NZ$90 million in earnings could have been included had the fleet operated as intended. Negotiations with engine makers are continuing as the airline seeks improved certainty around return-to-service schedules and appropriate compensation.
Chair Dame Therese Walsh said the volatility facing the carrier had prompted a comprehensive strategic reset.
“Given the ongoing volatility, including continued global engine maintenance impacts and a slower recovery in domestic demand, the Board and I asked Nikhil to undertake a full strategy review when he took up the chief executive officer role in October,” Walsh said.
“As New Zealand’s national airline we play an important role in supporting New Zealand, particularly as it relates to export and tourism. The strategy reset will allow us to be firmly focused on strengthening and growing our airline to deliver long term growth and prosperity for New Zealand.”
Comprehensive review
Chief executive officer Nikhil Ravishankar said the review would examine all aspects of the business.
“With the support of the Board we are 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,” he said.
Performance and product improvements are already underway, including improvements in domestic punctuality and reliability, and a decision to upgrade interiors across the airline’s existing Boeing 777 fleet to ensure a consistent widebody product.
Ravishankar said engine availability issues had taken longer than anticipated to resolve, but recent progress meant four grounded Airbus neo and Boeing 787 aircraft are expected to return to service during the 2026 calendar year.
The airline will also take delivery of the first two of ten new GE-powered 787 aircraft at the end of the financial year, supporting widebody capacity growth of approximately 20 to 25 per cent over the next two years.
“I want to thank our customers for their loyalty and Air New Zealanders for their ongoing professionalism and care for customers and each other as the tough operating environment persists,” he said.
Grounded aircraft
Passenger revenue rose four per cent to $3 billion, supported by additional capacity across the Tasman and Pacific Islands and a higher mix of premium seats on long-haul international routes. Overall network capacity was broadly flat, with up to eight aircraft grounded at times due to global engine maintenance delays.
Domestic demand recovery lagged expectations, while international performance was buoyed by strong offshore bookings, particularly in premium cabins. Outbound long-haul demand remained subdued.
Fuel costs increased four per cent to NZ$774 million. Although Singapore jet fuel averaged around US$88 per barrel, down from US$91 in the prior period, the benefit was offset by the weaker New Zealand dollar, higher CORSIA obligations and the use of less fuel-efficient aircraft amid engine constraints.
Non-fuel operating cost inflation of approximately NZ$75 million was driven by higher mandated domestic passenger levies, engineering and maintenance expenses, and airport landing charges. The airline warned that the trajectory of these costs could further pressure regional connectivity and long-term affordability.
Air New Zealand’s Kia Mau transformation programme delivered around NZ$45 million in incremental benefits during the half, with cumulative benefits of approximately NZ$145 million since inception last year. However, these savings were insufficient to fully offset broader cost escalation.
No interim dividend was declared, in line with the airline’s Capital Management Framework.
Looking ahead, and assuming an average jet fuel price of US$85 per barrel in the second half, the airline expects second-half earnings to be broadly in line with, or modestly below, the first half. However, it cautioned that material uncertainty remains around engine return schedules, compensation outcomes and ongoing volatility in key input costs and demand conditions.
