Passengers face higher prices as Air NZ hits turbulence

2026-03-04 - 16:07

The koru is said to symbolise growth and resilience, but financial winds are now buffeting Air New Zealand’s iconic symbol. A $40 million loss has grounded the feel-good narrative, just as other airlines ride a global travel boom. Across the Tasman, Qantas has just banked a billion-dollar profit, while in North America, Europe, and parts of Asia, carriers are reporting packed cabins and record revenues. So, today The Detail looks into whether New Zealand’s flagship airline can have a smoother path ahead. “The result itself was worse than we expected,” says head of research at Forsyth Barr, Andy Bowley, who studies the numbers and writes investment research on Air New Zealand. “Investors generally have an eye looking forward, more so than an eye looking back. And the outlook for the business is arguably worse than what the result was. So, from an expectations point of view, it was certainly disappointing.” He pointed to a perfect storm to explain the worse-than-expected result: grounded aircraft due to global engine maintenance issues, softer domestic demand, high airport and operating costs, and persistent inflationary pressure. “There’s a certain amount of work to be done here,” he tells The Detail. “I don’t think there is a quick fix for the airline. I think there are challenges that they have had in recent times with regard to the broader cyclical backdrop in New Zealand. “I think there have been challenges with regard to the engine maintenance issues, which have been well documented. “Those two issues will resolve themselves to some extent over the next 12 to 24 months, but I don’t think those are the only two issues impacting the airline, in terms of its ability to recover from the current woes that it’s in financially.” He says one of the biggest issues is the level of cost inflation in recent years. The airline has flagged a “reset” – a strategic review aimed at returning it to sustainable profitability. That could mean route rationalisation, tighter cost control, fleet adjustments, and potentially difficult workforce decisions. Adding to the uncertainty is escalating tension in the Middle East. Any widening conflict involving Iran could push up global fuel prices and force longer flight paths as airspace closes – a costly combination for airlines operating on thin margins. For Kiwi travellers, that may mean higher fares ahead. For nervous staff, questions linger over job security. Labour, says Bowley, is a “big cost bucket”. “I’m not the one to suggest that people will be laid off, but I suspect if they are looking to make savings, then the big cost buckets – where they can influence those cost buckets – will be under most scrutiny.” Deputy Prime Minister David Seymour has suggested it’s time to sell the government’s shares in Air New Zealand. The airline was privatised in 1989, but in 2001, it was bailed out by the government, which still owns a 51 percent stake. Independent aviation industry commentator Irene King tells The Detail that’s not a good idea. Air NZ, she says, is more than a company. It connects families, fuels tourism, underpins trade, and projects the country’s brand abroad. Instead, she says, the airline should work on a closer working relationship with Qantas to increase the number of tourists coming here. “That’s what the real game is, that is the reason we own Air New Zealand, it’s actually not to carry us abroad but in fact to bring more and more international tourists to New Zealand. “When they have some of those really good, tight, strategic relationships, the New Zealand pie starts to grow. Air New Zealand is a strategic infrastructural asset. And it is about growing the wealth for New Zealand, and we should never escape from that particular notion. “Privatisation, yes, has the potential to drive some wealth for some people, but Air New Zealand is about driving wealth for the whole of New Zealand. That’s the critical issue.” King is a loyal and regular Air NZ flyer, but says she wasn’t surprised by the airline’s latest result. “Look, it’s been very tough for them, and they don’t seem to have responded as I would have expected to known problems – well-flagged, well-known – and they sat back and said, ‘Oh well, let’s see it happen’. That’s what amuses me.” She points the finger at the airline’s board. “Normally, it comes from the board. The board has been in place for quite some time, and under good conditions and bad conditions. “One of the things with aviation boards is that in bad times, they have to understand the business backwards. And I would have thought they would have put a lot more aviation skill onto that board. If you don’t do that, you pay the price.” The question now is whether this is a temporary dip in altitude for Air New Zealand or the start of a much steeper descent. Check out how to listen to and follow The Detail here. You can also stay up-to-date by liking us on Facebook or following us on Twitter.