Air New Zealand reported a $40 million net loss for the first half of FY2026, citing global engine maintenance delays and escalating aviation costs. The airline is undertaking a strategic review to restore profitability and prepare for fleet expansion.
- H1 FY2026 net loss of $40 million
- Global engine maintenance delays grounding multiple aircraft
- Rising aviation system costs and weaker NZD pressure margins
- Strategic review initiated under new CEO Nikhil Ravishankar
- No interim dividend declared; cautious outlook for H2 earnings
Challenging First Half
Air New Zealand has revealed a loss before tax of $59 million and a net loss after tax of $40 million for the first half of the 2026 financial year. This marks a sharp reversal from the $144 million profit before tax reported in the same period last year. The airline attributes this downturn to a combination of persistent global engine maintenance delays, slower-than-expected domestic travel recovery, and rising costs across the aviation system.
Fleet Constraints and Operational Impact
Up to eight aircraft were grounded at times due to ongoing engine issues affecting the Boeing 787 Dreamliner and Airbus neo fleets. Despite receiving $55 million in compensation from engine manufacturers, Air New Zealand estimates that an additional $90 million in earnings were lost due to these constraints. The uncertainty around engine return schedules continues to hamper the airline’s ability to plan and sell capacity effectively, prolonging operational inefficiencies.
Cost Pressures and Currency Headwinds
Operating costs rose by 8%, driven by inflationary pressures on maintenance, passenger levies, and airport charges. Fuel costs increased by 4%, despite a slight drop in jet fuel prices, due to a weaker New Zealand dollar and the need to operate less fuel-efficient aircraft. The airline’s cost per available seat kilometre (CASK) rose by 7.7%, reflecting these inflationary and operational challenges.
Strategic Reset Under New Leadership
Since taking the helm in October 2025, CEO Nikhil Ravishankar has initiated a comprehensive strategic review aimed at returning Air New Zealand to sustained profitability. This includes operational improvements such as enhanced punctuality and reliability, a product upgrade for the Boeing 777 fleet, and a focus on cost transformation. The airline plans to take delivery of two new GE-powered Boeing 787 aircraft later this year, supporting a projected widebody capacity growth of 20-25% over the next two years.
Outlook and Dividend Policy
Looking ahead, Air New Zealand expects second-half earnings to be broadly in line with or modestly below the first half, assuming an average jet fuel price of US$85 per barrel. However, the outlook remains clouded by uncertainties around engine return timings, compensation negotiations, and ongoing cost volatility. Reflecting this cautious stance, the Board has decided not to declare an interim dividend, prioritising financial resilience and flexibility amid the challenging environment.
Bottom Line?
Air New Zealand’s strategic review and fleet renewal will be critical to navigating ongoing operational headwinds and cost pressures.
Questions in the middle?
- How will the strategic review reshape Air New Zealand’s cost structure and growth plans?
- What is the timeline and certainty around engine maintenance resolutions and compensation?
- How will rising aviation system costs affect regional connectivity and ticket affordability?