May 14 (Reuters) – Air New Zealand forecast its biggest annual pre-tax loss in four years on Thursday due to high fuel costs following the conflict in the Middle East, exacerbating weak demand and fleet constraints.
The airline projected an annual pre-tax loss of NZ$340 million to NZ$390 million ($201.62 million-$231.27 million) for the year ending June 30, assuming an average jet fuel price of $145 per barrel in the second half. This compares to last year’s profit of NZ$189 million.
The loss would be the carrier’s largest since 2022 and wider than the Visible Alpha consensus forecast of NZ$308.2 million.
Shares of the country’s flag carrier fell as much as 3.5% to NZ$0.425 in early hours of trading, while the broader S&P NZX 50 benchmark index 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.
A sharp spike in jet fuel prices over the past two months due to the Iran-U.S. war has hammered the aviation industry, where fuel accounts for up to a quarter of operating costs. This has forced airlines to raise fares and revise their financial outlooks.
Air New Zealand was among the first carriers to announce fare increases after the conflict broke out in late February. It had also suspended its full-year earnings forecast due to fuel market volatility.
Before the energy price surge, the carrier was already grappling with soft domestic demand and fleet constraints due to engine maintenance issues, threatening its fragile recovery since 2022.
Air NZ expects to consume about 4.1 million barrels of fuel in the January to June period, taking its fuel expenses to NZ$980 million for the second-half of the financial year, around 32% higher than predicted in February.
That will make its annual bill NZ$1.75 billion, compared with NZ$1.48 billion in 2025.
“If fuel prices stay at these elevated levels, the airline expects to announce further capacity updates in the coming weeks,” it said.
Air New Zealand has already reduced its capacity thrice. However, a recent slowdown in bookings alongside soft domestic and trans-Tasman demand continue to weigh.
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)
