Air New Zealand Suspends FY2026 Guidance Amid Jet Fuel Price Volatility

About Air New Zealand Limited

Air New Zealand Limited (NZX: AIR | ASX: AIZ) is the national carrier of New Zealand and one of the leading full-service airlines in the Asia-Pacific region. Headquartered in Auckland, the airline operates an extensive network of domestic and international passenger and cargo services linking New Zealand to key global markets including Australia, Asia, North America and the Pacific Islands.

The airline has built a reputation for operational efficiency, customer service and innovation, while maintaining a strategic role in supporting tourism, trade and economic connectivity across New Zealand. As a member of the global Star Alliance network, Air New Zealand collaborates with partner airlines to offer passengers seamless international connectivity.

However, like many global carriers, Air New Zealand remains highly sensitive to fluctuations in fuel costs, which typically represent one of the largest operating expenses for airlines. In its latest market announcement, the airline confirmed it has suspended its FY2026 earnings guidance due to unprecedented volatility in jet fuel markets following the escalation of conflict in the Middle East.

Jet Fuel Price Surge

Air New Zealand indicated that global jet fuel prices have risen sharply in recent days as geopolitical tensions have disrupted energy markets. Prior to the escalation of conflict, jet fuel prices were trading at approximately US$85 to US$90 per barrel.

Since the outbreak of hostilities, prices have surged to between US$150 and US$200 per barrel, creating significant uncertainty for airlines attempting to forecast operating costs for the remainder of the financial year.

Jet fuel pricing typically consists of two primary components: the underlying Brent crude oil price and the “crack spread”, which represents the refining margin between crude oil and refined jet fuel products. While crude oil prices have risen, the crack spread has also widened significantly, adding further volatility to aviation fuel costs.

Before the conflict, the crack spread was approximately US$22 per barrel. During recent market turmoil it has expanded dramatically, reaching as high as US$115 per barrel, reflecting severe dislocation in global fuel refining markets.

Impact on Earnings Outlook

At its interim financial results released on 26 February 2026, Air New Zealand had previously indicated that second-half earnings were expected to be broadly in line with, or modestly below, the first half of the financial year.

The airline reported a first-half loss of NZ$59 million and had assumed an average jet fuel price of approximately US$85 per barrel for the second half when providing that outlook.

However, the recent surge in fuel prices has rendered that assumption obsolete. As a result, management determined that the previously issued earnings guidance could no longer be relied upon and has formally suspended its FY2026 outlook until conditions stabilise.

The airline noted that the current fuel market environment could materially affect second-half financial performance, given the scale of the cost increases.

Fuel Hedging and Exposure

Air New Zealand has implemented fuel hedging strategies to mitigate some of the impact from rising crude oil prices. For the second half of the 2026 financial year, the airline is approximately 83 per cent hedged against movements in Brent crude.

However, like most global airlines, it remains exposed to fluctuations in the crack spread component of jet fuel pricing. Because refining margins have widened significantly during the current market disruption, hedging crude oil alone does not fully protect airlines from fuel price spikes.

The airline estimates that its fuel consumption from March through June will total approximately 2.9 million barrels, meaning that sustained elevated fuel prices could have a meaningful impact on operating costs during the remainder of the financial year.

Operational Response

In response to the rapidly changing cost environment, Air New Zealand has begun implementing initial fare adjustments across parts of its network. These pricing measures are designed to partially offset the increase in operating expenses associated with higher fuel prices.

Management indicated that additional pricing actions may be required if jet fuel costs remain elevated for an extended period. Airlines globally often adjust ticket prices or introduce fuel surcharges when sustained increases in fuel costs occur.

Beyond pricing strategies, Air New Zealand is also reviewing its network and scheduling to ensure capacity remains aligned with demand and operating conditions. Adjustments to routes or frequencies may be considered if cost pressures persist.

At the same time, the airline continues to progress internal cost reduction initiatives aimed at improving efficiency across operations. These initiatives are expected to help offset some of the financial impact from fuel price volatility.

Broader Industry Context

The aviation industry remains highly exposed to energy market volatility, as jet fuel typically represents between 20 and 30 per cent of an airline’s operating costs depending on fuel prices and route structure.

Geopolitical disruptions affecting oil markets can therefore have immediate consequences for airline profitability. Conflicts in major energy-producing regions often trigger rapid spikes in fuel costs, forcing airlines to revise financial forecasts and operational plans.

In addition to fuel prices, airlines also face other sources of uncertainty including aircraft availability, engine maintenance schedules and fluctuations in passenger demand.

Air New Zealand has previously noted that engine return schedules and compensation arrangements linked to aircraft maintenance programs also remain factors influencing its financial outlook.