Engine issues slice up to $40m off Air New Zealand’s bottom line, with worse to come

Air New Zealand’s half year results have been dealt a hefty blow from engine issues, keeping as many as 11 jets out of service at a time.

Air New Zealand has claimed its interim profit would have been up to $NZ40m ($36m) higher had it not had to deal with engine availability issues, which have kept multiple aircraft grounded throughout the period.

First half earnings fell 16 per cent to $NZ155m from $NZ185m a year earlier, with net profit dropping 18 per cent to $NZ106m.

Reduced flying and a 3 per cent fall in passenger numbers to 8.1m were directly attributable to the engine issues, which were likely to get worse before they improved.

Additional maintenance requirements by Pratt & Whitney and Rolls-Royce were to blame for as many as 11 aircraft being out of service at any one time.

Air New Zealand chief executive Greg Foran said the engine manufacturers had provided $NZ94m compensation to the carrier.

He said while it was pleasing to receive some compensation, it was still frustrating to be in the position they were.

“While compensation has played an important role in offsetting some of the financial impact of the delays, it falls well short of making the airline whole for the operational and economic losses sustained,” he said.

“We strive to deliver a reliable experience for our customers, however with 4 per cent less capacity available due to the engine maintenance delays this has been a real challenge for the airline.”

Air New Zealand boss Greg Foran is hopeful of better times ahead after a trying period with engine availability issues. Picture: Hannah Peters/Getty Images

No guidance was issued for the full year, due to the uncertainty around fleet availability, and a dividend of NZ1.25c a share announced.

Air New Zealand also advised it will commence a share buyback from March 7, for a maximum of $NZ100m in purchase price, and up to 343,720,838 of ordinary shares, currently at 56.5c.

The second half of 2025 was forecast to be even more challenging financially, marking the first full year impacted by global engine maintenance requirements.

In the case of Pratt & Whitney, there were “about 1000 engines queued up trying to get into their shops so they can be scanned to see if they’ve got any common issues”, Mr Foran said.

“Rolls-Royce know what they have to do to fix the problem. They’ve got to get a new blade, (and then) they have to get all of those engines to go through a major shop visit,” he said.

“That’s why they don’t all get fixed in a month or a quarter because they can only get so many engines done at a time.”

With so many jets out of service at Air New Zealand, the airline was “doing what it could to build resilience into its operations” including through schedule adjustments, leasing additional engines and prioritising customer experience improvements.

“The good news is we’ve got some new aircraft coming in the middle of next year from Boeing,” said Mr Foran.

“We were hoping to get them in February (but) we think they’re now going to be a few months behind that, because Boeing is struggling to get their production rate up.”

In terms of demand, the corporate and government markets continued to be subdued, but small and medium enterprise and leisure were holding up well.

Overseas routes to Bali, Japan, Singapore, Australia and the Pacific were performing strongly, and despite heated competition on North American routes Mr Foran said they were seeing solid underlying demand, particularly in the premium cabins.

Auckland International Airport’s results echoed those sentiments, with “strong international demand serving to offset softness in the domestic market”.

The gateway posted a NZ$148.1m (A$133m) net underlying profit for the six months to December 2024, up 2 per cent on the previous corresponding period.

An interim dividend of 6.25c a share will be paid on April 4.

Originally published as Engine issues slice up to $40m off Air New Zealand’s bottom line, with worse to come