(Bloomberg) — Air New Zealand reported a smaller-than-expected full-year loss despite soaring fuel costs and engine maintenance issues, but stopped short of pledging an immediate return to profit.
The pretax loss in the 12 months through June 30 was NZ$336 million ($200 million), the Auckland-based airline said Friday. The company had previously indicated the loss may be as great as NZ$390 million.
Rising fuel costs stemming from the impact of the Middle East war cost Air New Zealand NZ$135 million even after fare hikes, while the multi-year issue involving maintenance of certain Rolls-Royce and Pratt & Whitney engines added another NZ$190 million of costs as the airline had to lease less-efficient aircraft and reduce capacity on key routes. In response, the company has cut costs and is delaying new aircraft deliveries to make itself more resilient.
“It’s been a very challenging year for aviation, and our financial result reflects these challenges,” Chief Executive Officer Nikhil Ravishankar said in a statement. “We are making deliberate choices on capacity and taking a disciplined approach to both our costs and our capital.”
Prior to the Middle East conflict, the airline would have expected, in its central case, to return to profitability in the 2027 financial year, reflecting underlying improvements in the business, it said in a statement. The major factors that impacted the 2026 financial result are expected to continue to have some impact in the 2027 financial year, albeit to a lesser extent, it added.
Disruption from engine availability is reducing substantially as aircraft return to service, but there will be ongoing costs of as much as NZ$90 million in 2027 from lease commitments, while there are also further costs from routine aircraft maintenance and increased airport charges.
Transition, Recovery
“The airline expects 2027 to be both a transition and recovery year, with operational performance continuing to improve even as elevated fuel prices weigh on profitability,” the statement said. “We also expect the range of initiatives we have implemented in response to the currently elevated fuel cost will contribute to offsetting a larger portion of the elevated cost of fuel compared to the prior year.”
Speaking on a conference call, Ravishankar didn’t address 2027 earnings directly and executives reiterated it is too early to provide guidance. The average estimate of analysts surveyed by Bloomberg ahead of today’s result was that the company wouldn’t return to profit until 2028.
The airline would be capable of returning to profit if the jet fuel price was to settle in a new, higher range although that would require fare and capacity adjustments, he said.
“If fuel prices remain elevated, then we do have to look at the capacity lever quite seriously, and we are,” he said.
Ravishankar later told the New Zealand Herald the aim for 2027 “is to return the underlying performance of the business to turn a profit.”
“What the impact of fuel’s going to be is something that we’ll have to wait and see. But that is the goal,” he said.
(Updates with comments from earnings call in 10th paragraph.)
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