Air NZ warns of largest loss in four years as Iran war sends fuel cost soaring

By Nikita Maria Jino and Sameer Manekar

May 14 (Reuters) – Air New Zealand on Thursday forecast its largest pre-tax annual loss in four years, as sky-high fuel costs due to the Middle East conflict intensify pressure on an airline already grappling with weak demand and fleet constraints.

The airline projected a pre-tax loss of NZ$340 million to NZ$390 million ($201.62 million-$231.27 million) for the year ending June 30 compared to last year’s profit of NZ$189 million. The forecast assumed an average jet fuel price of $145 per barrel in the second half, the airline said.

The loss would be the carrier’s largest since 2022 and would exceed the Visible Alpha consensus estimate of NZ$308.2 million.

Shares of the country’s flag carrier fell as much as 3.5% to NZ$0.425, among the worst performers in the broader S&P NZX 50 benchmark index, which was down 0.3%.

“The scale and speed of recent movements in jet fuel prices and refining margins have created a material external shock for the global aviation sector,” Air NZ said in an exchange filing.

Jet fuel has cost $160 to $230 a barrel in the last 10 weeks, sharply higher than $85 to $90 a barrel before the conflict broke out in the Middle East, Air NZ said.

This surge has hammered the aviation industry, where fuel accounts for up to a quarter of operating costs. It has also deepened the strain on Air New Zealand, which was already contending with fleet constraints linked to engine maintenance issues and soft domestic demand.

The carrier has already hiked fares and consolidated capacity thrice, two key levers airlines use to cushion the impact of high fuel prices. It warned there could be further capacity consolidation if fuel prices stay high.

Jeremy Sullivan, investment adviser at Hamilton Hindin Greene, believes the pain for the carrier is not over yet because of a difficult combination of headwinds.

These include high fuel prices, slower bookings, aircraft availability issues and limited near-term pricing power, he said.

Air NZ expects its second-half fuel expense to be NZ$980 million, around 32% higher than predicted in February, taking its full-year bill to NZ$1.75 billion from NZ$1.48 billion in 2025.

The airline also said it would review its capital expenditure plans and the timing of aircraft deliveries to better align with demand and market conditions.

($1 = 1.6863 New Zealand dollars)

(Reporting by Nikita Maria Jino in Bengaluru; Editing by Shilpi Majumdar and Cynthia Osterman)