Air New Zealand (ASX: AIZ), the country’s flag carrier providing passenger and cargo transport services to and from New Zealand, has announced the suspension of its earnings guidance for the 2026 financial year. This decision comes in response to the extreme volatility observed in global jet fuel markets, triggered by the recent escalation of conflict in the Middle East. The airline had previously provided guidance on February 26, 2026, anticipating second-half earnings to be broadly in line with or modestly below the first half, assuming an average jet fuel price of US$85 per barrel.
The conflict has caused jet fuel prices to surge from US$85-90 per barrel to between US$150-200 per barrel. This spike is attributed to both an increase in Brent Crude prices and a significant widening of the crack spread, which represents the refinery margin between crude oil and refined jet fuel. The crack spread has risen from approximately US$22 per barrel before the conflict to as high as US$115 per barrel. While Air New Zealand has hedged 83% of its Brent crude exposure for the second half of FY26, it remains susceptible to fluctuations in the crack spread. The airline’s estimated fuel consumption for March to June is approximately 2.9 million barrels.
Given the unpredictable nature of the current situation, the jet fuel price assumption underlying the previous guidance is no longer valid. Air New Zealand anticipates that this crisis will significantly impact second-half earnings. Consequently, the airline has suspended its FY26 guidance until fuel markets and operating conditions become more stable.
In response to the rising costs, Air New Zealand has already implemented initial fare adjustments. The company may consider further pricing action and adjustments to its network and schedule if the conflict leads to sustained elevated jet fuel costs. Simultaneously, Air New Zealand is actively pursuing ongoing cost reduction initiatives to partially offset these financial pressures.
