Air New Zealand Limited

Air New Zealand reported a loss before tax of $336 million, compared with 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%. Around $465 million of pre-tax impact came from engine availability issues, fuel prices, and maintenance costs; fuel alone had an estimated net adverse impact of $135 million, maintenance costs increased $139 million excluding FX, and engine issues contributed about $190 million net of compensation. Operating cash flow was $819 million, liquidity finished at $1.6 billion, and net debt-to-EBITDA rose to 3.8x with EBITDA of $511 million versus $939 million last year. For FY2027, management expects group capacity to increase 2% to 4%, domestic capacity to be broadly flat, Tasman and Pacific capacity to rise 3% to 5%, and long-haul capacity to increase around 2% to 4%. It expects maintenance costs to be $50 million to $100 million lower, but declined to give earnings guidance because jet fuel is still around $140 to $150 per barrel.

Nikhil Ravishankar said the airline made progress on all five of his immediate priorities: reliability, aircraft return to service, cost reduction, strategy reset, and advocacy on aviation system costs. His tone was candid about the FY2026 result, calling it very difficult, but he emphasized that the fleet is now in a much better position and that operational performance has improved significantly. He highlighted a new strategy built around customer first, targeted growth, and a resilient future-fit business, and said strong inbound bookings and recent sales momentum are encouraging.

Richard Thomson focused on the financial damage from fuel, engine disruption, maintenance, and aviation system charges. He said the company ended the year with $1.6 billion of liquidity, operating cash flow of $819 million, and net debt-to-EBITDA of 3.8x, above target because EBITDA fell to $511 million and net debt increased with higher capex. He also noted no final dividend was declared, said engine-related headwinds should fall to $70 million to $90 million in FY2027, and said maintenance costs should be $50 million to $100 million lower, though aviation system costs and airport charges remain a meaningful inflation pressure.

Analysts focused on how fuel prices affect capacity and profitability, with questions about whether the FY2027 capacity plan aligns with the assumed $2.1 billion fuel bill. Management said the plan is being actively adjusted for fuel and that capacity could be lowered further if needed, while also saying the business can adapt if fuel stays around $120 per barrel but would face more pressure at $200. Questions also covered the path back to about $400 million of pre-tax profit, balance sheet flexibility, and compensation from engine lessors; management declined to give a detailed earnings bridge, said there are no borrowing covenants, and said additional compensation is not likely to be materially better than current levels.