Air New Zealand Limited

Air New Zealand reported a loss before taxation of $59 million and a net loss after taxation of $40 million. Passenger revenue increased 3.6%, revenue for the period rose $42 million, reported CASK increased 7.7%, and underlying CASK increased 5.7% excluding fuel and FX. Management said the first half included about $75 million of nonfuel cost inflation, around $45 million of transformation benefits, $55 million of engine compensation received, and at least $90 million of estimated earnings missed net of compensation due to engine issues. Liquidity ended the half at $1.3 billion, within the target range, and net debt-to-EBITDA was 2.6x. For the second half, management expects earnings to be broadly in line with or modestly below the first half, assuming an average jet fuel price of USD 85 per barrel; full-year nonfuel cost inflation is expected to be higher by around $150 million to $175 million, with life cycle maintenance expense a further $80 million to $100 million headwind, partly offset by $100 million to $120 million of transformation benefits for the full year.

Nikhil Ravishankar framed the quarter as one where Air New Zealand’s foundations remain strong but the operating environment is still unusually difficult. He emphasized safety, punctuality, customer service, loyalty, and a strong balance sheet, while saying the company is acting decisively on engine availability, cost discipline, fleet restoration, and strategy. His tone was candid but cautiously optimistic: he said improvements are coming, but they will be “patchy and nonlinear,” and the airline will not rely on hope or force growth before it can be operated reliably.

Richard Thomson focused on the financial drivers: passenger revenue growth of 3.6% was not enough to offset engine disruption, inflation, and flat network growth. He cited an average fuel price of USD 88 per barrel versus USD 85 in guidance, $55 million of engine compensation received, at least $90 million of direct and indirect engine-related impact net of compensation, and reported CASK up 7.7% with underlying CASK up 5.7%. He also outlined liquidity of $1.3 billion, net debt-to-EBITDA of 2.6x, about $1.4 billion of debt and lease repayments since FY23, and said aircraft-related capex this year is just over $1 billion.

Analysts pressed management on the strategy review, engine compensation into the second half, leverage, and whether FY27 is mainly a bridging year. Management said the review spans network shape, fleet deployment, new revenue opportunities, cost transformation, and capital management, with staff involvement and Board cycles still to come. On compensation, Richard said they are assuming roughly the same level in the second half as the first half, but some remains under negotiation; he also said the drag from recent strike action is about $9 million to $10 million. On leverage and capex, management said there is flexibility through unencumbered aircraft and fleet-plan timing, but acknowledged gearing is above target and capex remains front-loaded.