The airline said all existing Boeing 787s were expected back in service by late June. Photo / Brett Phibbs
Air New Zealand expects to lose up to $390 million this financial year, which ends on June 30.
The airline today said the Middle East war would cost it about $240m more than it had previously expected to pay for jet fuel.
In an NZX trading update today, the airline said it had reduced overall capacity 3-5% since the Iran-Israel-US war started.
Air New Zealand said fuel cost recovery should improve “over time” as earlier bookings get flown and new bookings reflect revised pricing.
It said outbound demand to some long-haul markets had softened, and demand from North America was mixed.
“Asia inbound and the cargo business have remained more resilient.”
It said domestic and transtasman demand had softened, in part because of reduced sale activity.
The airline said it expected fuel costs for the first six months of this calendar year to be about $980m.
That was $240m more than previously expected.
The airline now expected a 2026 financial year loss before tax of $340m to $390m.
The airline said all existing Boeing 787s were expected back in service by late June and all Airbus aircraft by 2027.
Issues with Rolls-Royce Trent 1000 engines had afflicted the Dreamliners.
The 787 and 777 make up its widebody fleet and all its narrowbody jets are from the Airbus A320 family.
A need to check the Pratt & Whitney PW1100G engines for microscopic cracks had impacted maintenance schedules.
Air NZ today said it would still incur costs for some leased aircraft and engines until the end of the 2027 calendar year.
But it said better aircraft availability would strengthen operational resilience, cut carrying costs and give more flexibility to deploy more fuel-efficient aircraft.
Some big spending will happen later than previously expected because of delays from aircraft manufacturers.
The Airbus worldwide backlog at the end of March was 9037 commercial aircraft and Boeing’s first quarter backlog was more than 6100 commercial aircraft.
Those backlogs combined are valued at about US$1.25 trillion ($2.1t).
Air New Zealand said management was focused on improving “operational excellence” and resolving engine challenges to increase aircraft availability.
“This has enabled the airline to return grounded aircraft to service a year ahead of schedule and deliver an on-time performance in April that ranked among top airlines globally.”
Aviation analytics provider OAG ranked Air New Zealand 56th in the world with 82.34% on-time performance in April.
That was behind Qantas, at 87.77% on-time performance, and ahead of Jetstar’s 75.84% on-time OAG ranking.
This morning’s market update came a day after Qantas said its biggest-ever New Zealand investment was underway.
Qantas Group chief executive Vanessa Hudson last night hosted a cocktail event in Wellington with guests including Prime Minister Christopher Luxon.
Air New Zealand said it had strengthened its funding flexibility in recent years.
That was because it had about $4b of available equity across aircraft it owned outright and those where its planes were worth more than any loans on them.
“This materially enhances balance sheet resilience and the airline’s ability to respond to periods of market volatility, such as the current fuel shock.”
The airline said it had moved quickly to mitigate the impact of higher fuel costs to protect earnings and preserve liquidity.
It said that included accelerating the cost reduction work already happening.
A “reset” was signalled when the airline announced a $40m first-half loss in late February.
Since then, a restructure impacting some senior managers has started.
Air New Zealand today said it identified up to $100m of annualised cost savings to date, which would flow into FY27 and beyond.
“Air New Zealand’s total available liquidity is approximately $1.3b, including an existing undrawn $250m syndicated standby facility,” it added.
It said Moody’s recently reaffirmed the company’s Baa1 credit rating but downgraded its outlook to negative.
“The rating retains Air New Zealand’s position among the highest-rated airlines globally.”
Air New Zealand shares this morning were down 1c to 42c.
John Weekes is a business journalist covering aviation. He previously covered consumer affairs, crime, politics and courts.