Air New Zealand Reports Resilient Financial Performance for 2025 Amid Operational Challenges and Rising Costs, Here is the Update

Published on August 31, 2025

Air New Zealand has announced its 2025 financial results, marking a year of resilience despite significant operational disruptions, inflationary pressures and a challenging domestic market. The airline recorded earnings before taxation of $189 million, compared to $222 million in the previous year, reflecting a slight decline due to engine-related issues and increased operating costs. Despite these challenges, Air New Zealand maintained a solid performance, at the upper end of its previously issued guidance.

Strong Performance Despite Operational Hurdles

For the 2025 financial year, the airline reported a net profit after taxation of $126 million, demonstrating resilience in the face of global engine maintenance challenges that led to a reduction in capacity. The airline’s available seat kilometers (ASK) capacity was down by 4%, with up to six narrowbody and five widebody aircraft grounded at various points due to engine maintenance constraints.

Passenger revenue declined by two percent, totaling $5.9 billion, primarily due to the four percent reduction in overall network capacity caused by engine unavailability. Despite this, the airline successfully mitigated some of the impact through operational efficiencies and disciplined cost management.

Fuel Costs Improve, but Operating Costs Rise

One of the bright spots in the airline’s financial results was the improvement in fuel costs, which decreased by 12%, or $208 million. This was largely due to a drop in average jet fuel prices and lower fuel consumption aligned with the airline’s reduced capacity. However, these savings were offset by a substantial increase in non-fuel operating costs, which rose by approximately $235 million, driven by higher landing charges, labour costs and increased engineering material prices.

The increase in operating costs is indicative of the broader inflationary pressures impacting the aviation sector globally. Air New Zealand noted that system-wide aviation costs were rising faster than the New Zealand Consumer Price Index and this trend is expected to continue in the near term.

Resilient Cost Control and Strategic Actions

In the face of rising costs, Air New Zealand adopted a disciplined approach to cost control. Targeted actions included renegotiating supplier contracts, reprioritising investment spending and embedding procurement discipline across the business. These efforts were aimed at reducing costs without compromising the quality of service offered to passengers.

The airline’s transformation initiatives, collectively known as the Kia Mau programme, delivered about $100 million in benefits during the year. The programme focused on improving ancillary revenue streams, capitalising on ongoing premium demand and enhancing digital self-service capabilities such as live chat and automated passenger rebooking. These digital solutions helped to streamline operations, reduce disruption costs and improve the customer experience.

Additionally, Air New Zealand’s operational improvements led to a six-percentage-point increase in on-time performance during the second half of the financial year, further improving the airline’s service levels despite the ongoing capacity constraints.

Engine-Related Disruptions and Compensation

Air New Zealand’s operational performance was significantly impacted by engine-related disruptions, with up to six narrowbody and five widebody aircraft grounded due to engine availability constraints. These disruptions were primarily caused by global maintenance challenges with key engine suppliers, including Rolls-Royce and Pratt & Whitney.

However, the airline received $129 million in compensation from engine manufacturers, helping to mitigate some of the financial impact of these disruptions. Despite this, Air New Zealand estimated that its earnings before taxation could have been approximately $165 million higher if the fleet had operated as intended.

CEO Greg Foran emphasised that the airline took early and decisive action to address the situation. Additional engines and aircraft were secured and schedules were optimised to maintain network stability and customer service levels. While these measures came at a considerable cost, they were deemed necessary to maintain operational continuity and keep passengers moving.

Shareholder Returns and Dividend Announcement

Reflecting confidence in the airline’s financial health, Air New Zealand declared a final unimputed ordinary dividend of 1.25 cents per share, which will be paid on 25 September 2025 to shareholders on record as of 12 September 2025. Additionally, the airline repurchased $38 million worth of shares under its share buyback programme, signalling a strong commitment to returning value to its shareholders.

Chair Dame Therese Walsh praised the airline’s ability to navigate the challenges of the year, emphasising the robustness of the business and the financial discipline instilled under the leadership of CEO Greg Foran. She described the result as solid, noting that the airline had faced significant operational and economic pressures. According to her, the performance reflected the capability of the team, the strength of the business and the financial discipline that had been cultivated throughout the year.

Continued Fleet Modernisation and Infrastructure Investments

In addition to managing operational challenges, Air New Zealand made significant strides in its long-term fleet renewal and infrastructure development plans. Four Boeing 787-9 Dreamliners were fully retrofitted and returned to service during the year, marking a significant milestone in the airline’s ongoing fleet modernization efforts.

The airline also unveiled a new uniform and announced plans for a new international lounge at Auckland Airport, further enhancing its customer offerings. Investments in infrastructure and digital capabilities continued throughout the year, with the construction of a new engineering hangar on track to open later in 2025. The expansion of the Christchurch Engine Centre is also progressing well.

With a focus on improving service, speed and efficiency, approximately 3,000 staff members were equipped with AI tools designed to enhance the passenger experience and operational performance.

Outlook for 2026: Gradual Improvement Expected

Looking forward to 2026, Air New Zealand anticipates that the engine-related groundings will continue, but it sees signs of gradual improvement. While the airline is not expecting an immediate recovery, early indications suggest that the most acute phase of the disruption may be behind them.

In the year ahead, more than half of the airline’s existing Boeing 787 fleet is expected to be equipped with fully modernised, premium-focused interiors, further supporting increased capacity on domestic and international routes. The airline will also take delivery of its first two new Boeing 787s, fitted with GE-powered engines, as part of its ongoing fleet renewal strategy.

Financial Guidance and Continued Challenges

While there are signs of gradual recovery, Air New Zealand is facing a challenging first half of the 2026 fiscal year. Increased aviation sector levies, alongside the ongoing impact of engine constraints and a subdued domestic economy, are expected to adversely affect the airline’s financial performance in the short term. As a result, the airline anticipates that its earnings before taxation for the first half of 2026 will be similar to or lower than those recorded in the second half of 2025, which amounted to $34 million.

Despite these challenges, the airline remains confident in its recovery prospects. With a strong balance sheet, a clear strategy and a committed team, Air New Zealand is well-positioned to navigate the road to recovery, particularly once engine issues and economic conditions begin to improve.

Image Credit- Air New Zealand