Air New Zealand holds capacity steady in May as long-haul yields lift

About Air New Zealand

Air New Zealand Limited (ASX: AIR) is New Zealand’s national carrier, operating an integrated network of scheduled passenger and cargo services to, from and within New Zealand. Its operations span domestic routes, short-haul services across the Tasman and Pacific Islands, and long-haul flying to Asia and the Americas.

Group capacity and demand

Group capacity decreased 0.1% in May compared with the prior year, with available seat kilometres broadly unchanged at 2,966 million. Revenue passenger kilometres edged down 0.2% to 2,430 million, and passengers carried slipped 0.3% to 1.135 million. The group passenger load factor was 81.9%, down just 0.1 points on May 2025.

The airline noted that while actual May capacity was reduced from planned levels across routes in the network, partly reflecting targeted reductions following the sharp rise in jet fuel prices after the conflict in the Middle East. Capacity has nonetheless been maintained and, in most cases, increased compared with the same time last year.

On a financial year-to-date basis, the group has grown modestly: passengers carried rose 0.9% to 14.574 million, revenue passenger kilometres increased 1.9% to 31,150 million, and available seat kilometres rose 1.4% to 37,120 million. The year-to-date load factor improved 0.4 points to 83.9%.

Unit revenue trends

A key feature of the update is the continued improvement in unit revenue. Group year-to-date RASK, passenger revenue per available seat kilometre rose 3.9% on a reported basis including foreign exchange, and 2.7% on an underlying basis excluding currency effects.

The performance varied by network. Short-haul year-to-date underlying RASK, which covers Domestic, Tasman and Pacific Islands, was 1.1% lower than the prior year, with domestic RASK up 0.1% and Tasman and Pacific Islands RASK up 0.4%. Long-haul year-to-date underlying RASK increased 5.9%, primarily reflecting reduced capacity across the long-haul network due to ongoing Boeing 787 aircraft-on-ground constraints, while demand remained comparatively resilient. The combination of tighter long-haul supply and steady demand has supported stronger yields on those routes.

Short-haul performance

Short-haul capacity increased in May, with available seat kilometres up 1.6% to 1,316 million, while passengers carried eased 0.3% to 994,000 and the load factor declined 1.0 points to 83.2%. Within short-haul, domestic capacity rose 2.9% to 476 million ASKs, supported by the two additional A321 aircraft in operation compared with May last year, with domestic passengers broadly steady and revenue passenger kilometres up 2.6%.

Tasman and Pacific services saw capacity rise 0.8% in May, though passengers carried fell 1.5% and the load factor softened 1.4 points to 84.6%. Across the financial year to date, the short-haul network has expanded more meaningfully, with available seat kilometres up 5.3% and Tasman and Pacific capacity up 7.8%, reflecting the staged introduction of new narrow-body aircraft.

Long-haul performance

Long-haul capacity contracted in May, with available seat kilometres down 1.3% to 1,650 million, consistent with the 787 availability constraints. Despite the reduction, the long-haul load factor improved 0.5 points to 80.9%, underscoring the resilience of demand against tighter supply.

The two long-haul regions performed differently. Asia saw May capacity rise 1.7% and passengers carried increase 3.4%, lifting the load factor 1.7 points to 82.6%, and a strong year-to-date load-factor gain of 2.7 points to 85.5% despite lower year-to-date capacity. The Americas, by contrast, saw May capacity fall 4.7% and passengers decline 5.4%, with the load factor easing 0.9 points to 78.9%, although the region’s year-to-date capacity remained marginally higher than the prior year.

Operating backdrop

The update points to two external forces shaping recent trading. The first is the impact of the Middle East conflict, which drove a sharp rise in jet fuel prices and prompted targeted capacity reductions to manage costs. The second is the ongoing Boeing 787 aircraft-on-ground situation, which has constrained long-haul flying and reduced available capacity on the network’s higher-distance routes.

While these factors have limited supply, the airline’s commentary indicates demand has held up comparatively well, particularly on long-haul, allowing unit revenues to strengthen even as passenger volumes remained broadly flat in the month.

Conclusion

The May 2026 update presents a picture of disciplined capacity management at Air New Zealand, with the airline trimming planned flying in response to fuel costs and fleet constraints while still growing modestly year on year and lifting underlying unit revenue. With long-haul yields benefiting from tighter supply and resilient demand, and domestic and short-haul capacity supported by new A321 aircraft, the carrier’s near-term trajectory will continue to depend on fuel prices, the resolution of 787 availability issues and broader demand conditions.