Air New Zealand’s Rising Costs Threaten Recovery Momentum
Air New Zealand has revised its first half 2026 financial outlook to a pre-tax loss between NZD 30 million and 55 million, citing weaker revenue growth and rising costs. The airline is pushing cost-saving measures while highlighting uncertainties ahead.
- 1H 2026 expected pre-tax loss of NZD 30-55 million
- Revenue uplift from domestic and US bookings failed to materialise
- Engine lease costs up by NZD 20 million due to end-of-lease obligations
- Carbon offsetting costs increased by NZD 10 million under CORSIA
- Ongoing negotiations with engine manufacturers over compensation
Air New Zealand Revises Earnings Outlook
In a notable update to its financial guidance, Air New Zealand has disclosed that it now expects a loss before taxation in the range of NZD 30 million to 55 million for the first half of its 2026 financial year. This marks a significant shift from earlier expectations of earnings similar to or below the NZD 34 million reported in the second half of 2025.
Revenue Growth Falls Short
The airline had anticipated a modest 2% to 3% increase in revenue driven by domestic and US-bound bookings. However, this uplift has not materialised, with forward bookings remaining subdued. Air New Zealand attributes this softness to a sluggish local economy impacting business, government, and leisure travel segments alike.
Rising Costs Add Pressure
Compounding the revenue challenges, engine lease costs have risen by approximately NZD 20 million due to the recognition of end-of-lease obligations on two short-term aircraft leases previously unaccounted for. These costs are non-cash for the period but represent a material financial burden. Additionally, the airline’s carbon offsetting obligations under the international CORSIA scheme have increased by around NZD 10 million, further inflating fuel-related expenses.
Operational Challenges and Cost Initiatives
Air New Zealand continues to invest in medium to long-term growth, maintaining a full workforce and additional fleet capacity to support recovery as aircraft availability improves. The airline is actively pursuing cost-saving and efficiency initiatives, building on its Kia Mau transformation programme, which aims to deliver both cost reductions and revenue enhancements during 2026.
Meanwhile, the airline remains in active negotiations with engine manufacturers over compensation for unserviceable engines, a situation that has grounded between 9 and 11 aircraft at times since the start of the financial year. The timing and amount of any compensation remain uncertain and are not factored into the current outlook.
Looking Ahead
Air New Zealand cautions investors against extrapolating first-half results to the full year, noting planned capacity growth in the second half of 2026 could alter performance dynamics. The airline also continues to advocate for more affordable airport charges and third-party costs to support the broader New Zealand economy and tourism sector.
Bottom Line?
Air New Zealand’s revised outlook underscores ongoing recovery challenges and cost pressures, setting the stage for a critical second half of 2026.
Questions in the middle?
- How will ongoing engine compensation negotiations impact future earnings?
- Can Air New Zealand’s cost-saving initiatives offset rising operational expenses?
- What effect will second-half capacity growth have on full-year profitability?
