Air New Zealand is expecting a full-year loss before tax of over $300 million, citing "elevated and volatile" jet fuel prices amid ongoing tensions in the Middle East.
On NZX this morning, the airline said it expected a FY26 loss before tax in the range of $340 million to $390 million.
The expected losses were based on current trading conditions and an assumed average jet fuel price of approximately US$145 per barrel for the second half of the year, with monthly prices ranging between US$85 and US$200 per barrel.
The conflict in the Middle East has sent oil prices skyrocketing, with Iran effectively closing the Strait of Hormuz, a crucial shipping route through which one-fifth of the world's oil exports travel.
The aviation industry has been significantly impacted by the conflict, with Air New Zealand saying jet fuel prices had skyrocketed to between US$160 and US$230 per barrel in the last 10 weeks. It said prices were around US$85 to US$90 per barrel prior to the escalation of the conflict.
Air New Zealand expected fuel costs in the second half of the financial year to be $980 million, compared to the previous $740 million.
"This has driven a $240 million headwind to the expected FY26 result, inclusive of hedging.
"The airline continues to work closely with jet fuel suppliers, government and other industry participants, and remains confident in the security of its jet fuel supply through to July 2026."
It said it had "moved quickly" to mitigate the impact of higher fuel costs.
"This includes implementing a number of targeted financial, commercial and operational actions, and accelerating the cost reduction work already underway."
Air New Zealand said its updated earnings included the impact of higher fuel costs, which were partly offset by approximately $70 million of mitigation actions.
It also said the outlook incorporated around $50 million in unexpected leased-engine maintenance costs and $12 million in lower compensation, "reflecting the earlier than expected return of engines".
"Management remains focused on continuing to improve operational excellence and resolving our engine challenges to increase aircraft availability.
"This has enabled the airline to return grounded aircraft to service a year ahead of schedule and deliver an on-time performance in April that ranked among top airlines globally."
Aircraft availability had "improved significantly" since the interim results, with all Boeing 787s impacted by engine maintenance delays expected to return to service by late June. All Airbus planes were expected to return by 2027.
"Improved aircraft availability will strengthen operational resilience, reduce associated carrying costs progressively and provide greater flexibility to deploy the airline’s most fuel-efficient aircraft in the current higher fuel-cost environment."
The airline said that while it had implemented fare increases and flight reductions, recovering the full impact of higher fuel costs would hit demand, so it was taking a "measured approach" to pricing and capacity.
"This revised outlook remains subject to material uncertainty, including continued volatility in jet fuel prices and refining margins, global economic conditions, demand conditions, the timing and quantum of further capacity adjustments, finalisation of engine return schedules, and the finalisation and timing of realisation of annualised cost-out benefits.
"Air New Zealand will continue to update the market as appropriate."
It had identified up to $100m of annualised cost savings to date, and is reviewing upcoming capital expenditure plans.
1News has asked chief executive Nikhil Ravishankar for an interview.
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