Air New Zealand profit tumbles amid weak economy, competition

Air New Zealand said annual profit more than halved as a weak economy sapped domestic demand and competition on international routes intensified.

Net profit slumped almost 65% to NZ$146 million ($91 million) in the 12 months ended June 30, the Auckland-based airline said on Thursday. It expects tough trading conditions to continue through the first half of the 2025 financial year and declined to provide guidance on the earnings outlook.

“The challenges we are facing are not unique to Air New Zealand,” Chief Executive Greg Foran said. “Supply chain and aircraft delivery delays, growing costs and a shortage of labor in key areas like engineering are major issues facing many airlines across the global aviation industry. While these issues continue to play out, Air New Zealand is expecting a challenging year ahead.”

New Zealand’s economy is forecast to slip into its third recession in less than two years, curbing ticket sales on the national airline’s domestic network, while elevated competition from US carriers also dented its financial performance.   

Air New Zealand said maintenance requirements for Pratt & Whitney PW1100 engines worldwide have meant that as many as six of its newest and most efficient Airbus neo aircraft have been out of service at times. Ongoing additional maintenance requirements on the Trent 1000 engines that power its Boeing Co. 787 fleet, as well as reduced levels of spares in the market, have also hampered operation of as many as three Dreamliners.

Full-year revenue rose 6.7% to NZ$6.75 billion. Passenger revenue increased 11% to NZ$5.9 billion driven by a 23% ramp-up in capacity, primarily across the international long-haul network. This was partially offset by the weaker demand environment and higher levels of competition. 

Non-fuel operating cost inflation of approximately NZ$225 million was a significant drag on the airline’s financial performance, it said. 

“With landing charges, air navigation fees and engineering materials leading the increases, the non-fuel operating cost uplift of 6% for the year brings the cumulative impact of inflation across the past five years to 20 to 25%,” it said.

Pretax earnings sank to NZ$222 million from NZ$574 million a year earlier. The airline declared a final dividend of 1.5 cents a share, taking the total distribution for the year to 3.5 cents.