Air New Zealand Reports $189m EBIT, 4% Capacity Drop, and 1.25c Dividend

Financial Resilience Amid Operational Challenges

Air New Zealand has delivered a solid financial performance for the fiscal year ended June 2025, posting earnings before taxation of NZD 189 million and a net profit after taxation of NZD 126 million. This result, while down 15% from the prior year, reflects the airline’s ability to navigate significant operational headwinds, including the grounding of up to 11 narrowbody and widebody jets due to global engine maintenance requirements.

The airline’s available seat kilometres (ASK) capacity declined by 4%, directly impacting passenger revenue, which fell 2% to NZD 5.9 billion. Despite these constraints, Air New Zealand managed to reduce fuel costs by 12%, benefiting from lower jet fuel prices and reduced consumption aligned with the constrained capacity.

Cost Pressures and Transformation Benefits

Non-fuel operating costs increased by approximately NZD 235 million, a 6% rise driven by inflationary pressures such as higher landing charges, labour costs, and engineering materials. The airline’s disciplined cost control measures, including renegotiated supplier contracts and reprioritised investments, helped mitigate some of this inflationary impact.

Air New Zealand’s Kia Mau transformation initiatives delivered around NZD 100 million in benefits, enhancing ancillary revenue through improved product offerings and digital self-service tools like live chat and automated passenger rebooking. Operational improvements also boosted on-time performance by six percentage points in the second half of the year, partially offsetting inflationary pressures and laying groundwork for stronger long-term financial health.

Shareholder Returns and Leadership Transition

Reflecting confidence in the airline’s financial position, the Board declared a final unimputed ordinary dividend of 1.25 cents per share, payable in September 2025. Additionally, the airline returned NZD 38 million to shareholders through its ongoing share buyback program.

Chair Dame Therese Walsh praised the resilience and discipline of the management team, particularly CEO Greg Foran, who will step down later in 2025 after leading the airline through a challenging period marked by the Covid-19 pandemic and ongoing operational disruptions.

Outlook, Engine Constraints and Gradual Recovery

Looking ahead to 2026, Air New Zealand anticipates continued engine availability constraints, with up to 10-11 aircraft grounded at times. While compensation negotiations with engine manufacturers remain uncertain, the airline expects first-half earnings before taxation to be similar or lower than the second half of 2025, reflecting ongoing cost inflation and subdued domestic demand.

However, signs of gradual improvement are emerging, with more than half of the Boeing 787 fleet expected to feature fully modernised interiors and the delivery of two new Boeing 787s with GE-powered engines. These developments, alongside network expansions and digital investments, position Air New Zealand for recovery as operational challenges ease.

Sustainability Commitment and Climate Strategy

Air New Zealand reaffirmed its commitment to sustainability through the publication of its 2025 Climate Statement, outlining a net zero carbon emissions target by 2050. The airline introduced a new 2030 Emissions Guidance, targeting a 20-25% reduction in net greenhouse gas emissions from a 2019 baseline.

The airline’s Transition Plan focuses on four key decarbonisation levers, sustainable aviation fuel (SAF), fleet and network optimisation including next generation aircraft, operational efficiency, and carbon credits. SAF usage increased to 1.7% of total jet fuel in 2025, with ambitious targets to reach 10% by 2030. The plan also acknowledges challenges such as technology development, policy support, and competitive distortions due to uneven global regulations.

Material climate-related risks identified include operational resilience to weather events, emissions pricing volatility, SAF availability and cost, fleet transition delays, and competitive disadvantage from regulatory asymmetry. The airline integrates these risks into its enterprise risk management framework and capital deployment decisions.