Air New Zealand Limited

Air New Zealand reported a loss before tax of $336 million, versus earnings before tax of $164 million in the prior year. Operating revenue increased 3.9% to $7 billion, passenger revenue rose 4.8% to $6.1 billion, cargo revenue was broadly flat at $484 million, and RASK increased 3.4%. Operating cash flow was $819 million versus $940 million last year, liquidity ended at $1.6 billion, net debt was about $1.9 billion, and net debt-to-EBITDA was 3.8x. Management said roughly $465 million of profit-before-tax impact came from engine availability issues, fuel, and maintenance costs; engine delays cost about $190 million net of compensation, the fuel spike had an estimated net pretax impact of $135 million after hedging and capacity/fare actions, and maintenance costs increased by $139 million excluding FX. For FY27, the airline expects group capacity to increase 2% to 4%, domestic capacity to be broadly flat, Tasman/Pacific capacity to rise 3% to 5%, and long-haul capacity to grow around 2% to 4%. Management said it cannot provide earnings guidance for FY27 due to fuel uncertainty, but expects maintenance costs to be $50 million to $100 million lower and still sees a $70 million to $90 million engine-related headwind.

Nikhil Ravishankar framed FY26 as a difficult year financially but emphasized that the airline made tangible operational and strategic progress. He highlighted better punctuality, returning grounded aircraft to service, and a sharper strategy built around customer first, targeted growth, and being resilient and future fit. His tone was candid about the fuel shock and cost pressures, but confident that the business enters FY27 with a more reliable fleet, stronger operations, and stronger inbound demand.

Richard Thomson focused on the financial drag from three main transitory items: engine disruption, the fuel shock, and maintenance costs. He said the combined adverse impact was about $465 million, including roughly $190 million from engine issues, a $328 million gross fuel bill increase that became about $135 million net after hedging and mitigation, and $139 million of higher maintenance costs excluding FX. He also pointed to $1.6 billion of liquidity, net debt of about $1.9 billion, 3.8x net debt-to-EBITDA, no final dividend, and explained that there are no borrowing covenants, though the company is focused on restoring leverage and Moody’s investment-grade rating.

Analysts focused on how fuel assumptions map to capacity, whether the business can be profitable at roughly $120 Brent, and how quickly FY27 can recover toward stronger pretax earnings. Management said capacity is being actively adjusted around fuel, that if $120 fuel persisted the market would adapt and the airline could get back to profitability, but that $200 oil would be a different scenario. Questions on debt and compensation drew the response that there are no covenants, there is still balance-sheet flexibility, and additional engine/lessor compensation is not expected to be materially better than current levels. Analysts also asked about domestic demand mix; management said corporate and SME demand is improving, leisure is flat, and government demand is slightly up.