Air New Zealand has swung to a loss before taxation of approximately AU$50 million (NZ$59 million) for the first half of its 2026 financial year, a sharp reversal from the AU$121 million (NZ$144 million) profit reported in the prior corresponding period, as global engine maintenance delays, cost inflation, and a slower domestic recovery weigh on the carrier.
The airline’s net loss after taxation was A$34 million (NZ$40 million). The result was slightly outside the airline’s own October 2025 guidance range of an A$25 million to A$46 million (NZ$30 million to NZ$55 million) loss, with Air New Zealand attributing the miss primarily to an A$11 million (NZ$13 million) headwind from higher-than-assumed fuel prices in the second quarter.
Operating revenue rose 1.2 per cent to A$2.9 billion (NZ$3.4 billion). Passenger revenue improved 3.6 per cent to A$2.5 billion (NZ$3 billion), supported by additional capacity across the Tasman and Pacific Islands and a stronger premium cabin mix on long-haul international routes.
The airline reported EBITDA (earnings before interest, taxes, depreciation and amortisation) of A$292 million (NZ$347 million), a measure of operating earnings that strips out financing and accounting costs to give a clearer picture of how the core business is performing.
What’s behind the AU$50 million loss?
Air New Zealand says the result reflects a combination of ongoing fleet constraints due to global engine maintenance delays, a slower-than-expected recovery in domestic demand, persistently high aviation system inflation, and a weaker New Zealand dollar.
Non-fuel operating cost inflation of approximately A$63 million (NZ$75 million) was driven primarily by higher mandated domestic passenger levies, engineering and maintenance costs, and airport landing charges, according to the airline.
According to Air New Zealand’s investor presentation, its non-fuel operating costs have risen 37 per cent since 2019, outpacing New Zealand CPI of 29 per cent over the same period. Landing charges have increased by 64 per cent, engineering materials by 45 per cent, air navigation charges by 37 per cent, and labour costs by 31 per cent.
The airline says its domestic fares have risen 32 per cent over that time, meaning it has absorbed a significant portion of the cost increase rather than passing it fully to customers. No interim dividend was declared, consistent with the airline’s Capital Management Framework.
How big is the engine challenge?
Engine maintenance delays remain the single largest drag on Air New Zealand’s earnings. While the airline received AU$46 million (NZ$55 million) in compensation from engine manufacturers during the half, it estimates an additional AU$76 million (NZ$90 million) of earnings could have been included in the result had its fleet operated as intended. That estimate, based on the airline’s internal modelling of capacity, passenger demand, and disruption costs, suggests the carrier would have been profitable without the engine issues.
Air New Zealand reports that up to eight aircraft were grounded at various points during the half. Seven of its 14 retrofitted Boeing 787-9 aircraft are now back in service, with a further four grounded Airbus neo and Boeing 787 aircraft expected to return throughout the 2026 calendar year. Compensation arrangements for certain engines are yet to be agreed for the second half, and the airline says this could materially impact full-year earnings.
What’s happening across the Tasman and beyond?
Trans-Tasman flights remain a bright spot, with capacity up 9 per cent year on year, supported by two new A321neo leased aircraft and the launch of the new Christchurch to Adelaide route in October 2025. Pacific Islands’ capacity grew 6.9 per cent. International long-haul capacity fell 4 per cent, constrained by grounded aircraft, though the airline says inbound demand remained solid and premium cabin revenue grew 10 per cent.
Domestically, Air New Zealand carried 5.1 million passengers, down 2 per cent, with capacity broadly flat. The airline says domestic demand has been slower than expected, though it notes signs of improvement in business travel later in the half. Across the group, 8.1 million passengers were carried, with a load factor of 83.6 per cent.
Where does Air New Zealand go from here?
Chair Dame Therese Walsh said, “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.”
CEO Nikhil Ravishankar said, “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 added that regional on-time performance has improved to 83.9 per cent from 73.3 per cent following a schedule review and reset, and the airline was ranked second in the Asia-Pacific in the 2025 Cirium On-Time Performance Review.
Air New Zealand expects to take delivery of the first two of ten new GE-powered 787 Dreamliners at the end of the financial year, supporting widebody capacity growth of approximately 20 to 25 per cent over the next two years. The airline also recently launched its refreshed Koru loyalty program, including the new Koru Black tier, with Airpoints membership growing 8 per cent to over 5.2 million members.
For the second half, Air New Zealand expects earnings to be broadly in line with, or modestly below, the first half, based on current trading conditions and an assumed jet fuel price of US$85 per barrel. That guidance points to a full-year loss, though the airline cautions the outlook is subject to material uncertainty around engine return schedules and compensation negotiations.
By contrast, Qantas reported a $1.46 billion profit before tax for the same period.
KARRYON UNPACKS: Air New Zealand’s half-year loss and subdued second-half outlook are a reminder that engine supply chain issues continue to disrupt airline operations well beyond manufacturer timetables. For Australian travel advisors selling trans-Tasman, the carrier’s growing Tasman capacity, new Christchurch to Adelaide route and improving on-time performance are positives, but ongoing fleet constraints are worth flagging with clients booking itineraries that depend on schedule certainty.
