Air New Zealand reported a challenging first half of its 2026 financial year, posting a net loss of $40 million. The result, announced today, reflects ongoing headwinds including global engine maintenance issues, a slower-than-expected recovery in domestic travel and rising costs exacerbated by a weaker New Zealand dollar. The airline’s loss before taxation reached $59 million, a significant drop from the $144 million profit reported during the same period last year. This interim result has prompted a strategic review aimed at resetting the business for long-term profitability.
The airline cited persistently high aviation system inflation as a key factor impacting its bottom line. Fuel costs increased by 4%, reaching $774 million, and overall non-fuel operating costs rose by approximately $75 million, driven by higher domestic passenger levies, engineering and maintenance expenses, and airport charges. The result fell slightly outside the previously provided guidance range of a $30 to $55 million loss, with a $13 million impact attributed to higher-than-anticipated fuel prices in the second quarter.
Strategic Review Underway
Responding to the results, Air New Zealand Board Chair Dame Therese Walsh announced a comprehensive strategy review led by Chief Executive Officer Nikhil Ravishankar, who took on the role in October 2025. “As New Zealand’s national airline we play an important role in supporting New Zealand, particularly as it relates to export and tourism,” Walsh stated. “The strategy reset will allow us to be firmly focused on strengthening and growing our airline to deliver long term growth and prosperity for New Zealand.”
Ravishankar echoed this sentiment, outlining plans for a thorough examination of all aspects of the business. “With the support of the Board we are undertaking a comprehensive review of all aspects of the business, with the objective of returning the airline to sustained profitability through enhanced operational performance, growth and further cost transformation initiatives,” he said. The airline is also implementing performance and product improvements, including upgrades to the interiors of its existing 777 fleet to ensure a consistent, modern widebody experience.
Engine Issues and Compensation
A significant contributor to the financial strain has been ongoing issues with aircraft engines. Air New Zealand received $55 million in compensation from engine manufacturers during the first half, but estimates that an additional $90 million in earnings could have been realized had the fleet operated as intended. The airline is currently engaged in negotiations with manufacturers to secure more predictable engine return schedules and appropriate compensation for disruptions. The airline now expects four grounded Airbus neo and Boeing 787 aircraft to return to service throughout 2026, and anticipates taking delivery of two of ten new GE-powered 787s later in the financial year, which will increase widebody capacity by 20% to 25% over the next two years.
Comparison with Qantas
The results contrast sharply with those of Australian airline Qantas, which reported a first-half underlying pre-tax profit of $1.5 billion, a 5% increase year-over-year. Qantas’ bottom line was $925 million on revenue of $12.9 billion, a 6% increase. Qantas Group CEO Vanessa Hudson attributed the strong performance to robust travel demand, despite acknowledging increasing costs related to airport charges and government fees.
Air New Zealand did see a 4% improvement in passenger revenue, reaching $3 billion, supported by increased capacity on routes across the Tasman Sea and to the Pacific Islands, as well as a higher proportion of premium seats on long-haul flights. However, this was not enough to offset the broader challenges facing the airline.
The Board has not declared an interim dividend based on the current results. Investors will be looking to the outcome of the strategic review and the airline’s performance in the second half of the financial year for signs of recovery. Air New Zealand anticipates second-half earnings will be broadly in line with, or modestly below, the first half, assuming an average jet fuel price of US$85 per barrel.
This reporting contains financial information and should not be considered financial advice.
Air New Zealand is scheduled to provide further updates on its strategic review and financial performance during its full-year results announcement. We will continue to follow this story as it develops. What are your thoughts on Air New Zealand’s challenges? Share your comments below.
