Air New Zealand Limited

Air New Zealand reported a loss before tax of $59 million and a net loss after tax of $40 million in the half. Passenger revenue increased 3.6%, revenue rose $42 million, reported CASK increased 7.7%, and underlying CASK increased 5.7% excluding fuel and FX. Management said it received $55 million of engine-related compensation in the half, but still estimated at least $90 million of earnings was missed net of compensation. For the first half, nonfuel cost inflation was about $75 million, or around 3.5%, and transformation benefits totaled about $45 million. For the second half, management expects capacity to be up around 3% to 4% if engine reliability improves and the first GE-powered 787 arrives at the very end of the financial year. Full-year nonfuel cost inflation is expected to be higher by around $150 million to $175 million, life cycle maintenance expense to add about $80 million to $100 million of headwind, and transformation benefits to total $100 million to $120 million. Second-half earnings are expected to be broadly in line with or modestly below the first half, assuming an average jet fuel price of USD 85 per barrel. Liquidity ended at $1.3 billion, within the target range, and net debt-to-EBITDA was 2.6x.

Nikhil Ravishankar framed the quarter as a period of tough operating conditions but emphasized execution discipline, saying the airline cannot wait for conditions to improve and must act on reliability, cost control, and fleet restoration. He highlighted five priorities: safe and punctual service, profit improvement, returning grounded aircraft, sharpening strategy and operating model, and advocating for a fairer aviation system. His tone was cautious but constructive, repeatedly stressing that progress will be gradual and that the airline is building a future-fit plan through the strategy review.

Richard Thomson focused on the financial bridge from revenue growth to bottom-line pressure: passenger revenue rose 3.6%, but engine issues, inflation, and flat network growth continued to weigh on earnings. He cited $55 million of compensation in the half, average fuel of USD 88 per barrel versus USD 85 in guidance, reported CASK up 7.7%, and underlying CASK up 5.7%; excluding engine issues, he said CASK would have been about 3% better. He also walked through liquidity and capital allocation, noting $1.3 billion of liquidity, net debt rising as CapEx ramped, and no interim dividend under the trailing-12-month policy. CapEx is heavy, with aircraft CapEx just over $1 billion this year and about $950 million to $975 million next year, while the company has repaid about $1.4 billion of debt and leases since FY23 and received $125 million of cash collateral back in the first half.

Analysts pressed on the strategy review, engine compensation in the second half, leverage above the target range, and whether profitability can recover as the fleet normalizes. Management said the strategy review covers network shape, fleet deployment, new revenue opportunities, cost transformation, and capital management, and that staff will be engaged next week before Board cycles are completed. On compensation, Richard Thomson said they are assuming roughly the same level as the first half, but it remains under negotiation and is a key source of downside risk to H2 guidance; he also said a recent strike created a $9 million to $10 million drag. On leverage and future profitability, management said the balance sheet can support the CapEx program, but earnings recovery depends on capacity returning, fewer system price shocks, and lower maintenance drag as the fleet improves.