Air New Zealand shares sink as investors brace for a major loss

Air New Zealand Ltd (ASX: AIZ) shares are falling on Thursday after the airline handed investors a disappointing update.

At the time of writing, the Air New Zealand share price is down 4.23% to 34 cents.

The latest fall adds more pain to a weak year for shareholders. The stock is now down 33% in 2026 and 39% over the past 12 months.

Here’s why investors are selling today.

Fuel costs smash the outlook

In its market update, Air New Zealand said elevated and volatile jet fuel prices have had a significant impact on its FY26 outlook.

The airline now expects a loss before tax of NZ$340 million to NZ$390 million for FY26.

In FY25, Air New Zealand reported pre-tax profit of NZ$216 million, so the downgrade points to a major earnings swing.

A big part of the problem is jet fuel, which has become far more expensive in recent weeks.

Air New Zealand said jet fuel prices were around US$85 to US$90 per barrel before the recent Middle East conflict. Since then, prices have traded between roughly US$160 and US$230 per barrel.

The company said it expects its second-half fuel cost to be about NZ$980 million, compared with around NZ$740 million assumed at the interim result.

Including hedging, the higher fuel bill has added a NZ$240 million headwind to the expected FY26 result.

Demand has also cooled

Fuel is not the only problem weighing on the outlook.

Air New Zealand said booking momentum has moderated in recent weeks, after initially tracking ahead of FY25.

The weakness is showing up in several parts of the network. Domestic and Trans-Tasman demand have softened, while outbound demand to some long-haul markets has also weakened.

North America outbound demand has been more mixed, while Asia inbound and cargo have held up better.

The airline has responded by making 3 targeted capacity cuts. Overall group capacity has now been reduced by around 3% to 5% across its networks.

Air New Zealand has also lifted fares to help recover some of the higher fuel costs. But the company said trying to recover the full impact over a short period could put more pressure on demand.

Balance sheet still gives some support

There were still a few points of support in the update.

Air New Zealand said it still has around NZ$1.3 billion in total available liquidity. This includes an undrawn NZ$250 million syndicated standby facility.

The airline is also finalising a US$400 million secured revolving credit facility, backed by part of its unencumbered aircraft pool.

Once completed, the company said the facility would lift pro-forma liquidity by about NZ$670 million.

Management also said it is not currently considering any capital transactions, which may give investors some comfort after the earnings downgrade.

Cost savings are also being targeted. Air New Zealand has identified up to NZ$100 million of annualised savings so far, with benefits expected through FY27 and beyond.

The post Air New Zealand shares sink as investors brace for a major loss appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.