Air New Zealand Limited (ASX: AIZ) is New Zealand’s flagship airline, providing domestic and international air travel services. The airline operates a fleet of modern aircraft, offering passenger services, cargo solutions, and a range of travel-related services. Air New Zealand is committed to innovation and customer experience, with recent initiatives including updates to its Seats-to-Suit offering and the introduction of live chat for improved customer support. Air New Zealand was listed on the ASX on 1 July 2002.

Growth Challenges

Air New Zealand has revised its pre-tax profit expectations for the first half of FY25, forecasting a significant decline to between NZ$120 million and NZ$160 million. The airline attributes this downward revision to several operational challenges, notably issues related to aircraft availability. The primary cause of these difficulties is global delays in engine maintenance, which have impacted the airline’s fleet and are expected to persist until early 2026.

The delays in engine overhauls, particularly for the Boeing 787 Dreamliner and Airbus A320neo aircraft, have reduced the airline’s operational capacity. These delays, which have affected the global aviation industry, are due to ongoing supply chain disruptions and a shortage of critical engine components.

As a result, Air New Zealand’s fleet will remain under capacity for the foreseeable future, with several aircraft grounded for extended periods. Up to six Airbus A320neo and four Boeing 787 aircraft are expected to remain out of service, reducing the airline’s ability to operate at full strength. This reduction in fleet size has had a direct impact on Air New Zealand’s ability to meet demand, especially during peak travel periods.

In response to these fleet shortages, the airline has adjusted its flight schedules and scaled back operations on some routes. It has focused on maintaining high-demand, profitable flights while suspending or reducing services on less critical routes. Although efforts to lease additional aircraft are underway, these maintenance delays remain a significant constraint. Air New Zealand has acknowledged that these challenges are unlikely to ease before 2026, continuing to place pressure on its financial performance.

Additionally, the airline is facing ongoing challenges in the recovery of government-related travel, which has not rebounded as quickly as corporate travel. While business travel is showing signs of recovery, government travel remains subdued, further exacerbating the financial strain. The airline’s updated forecast reflects these compounded challenges, as it works to navigate a period of reduced capacity and fluctuating demand.

Strategic Initiatives

In light of these operational challenges, Air New Zealand is pursuing several strategic initiatives aimed at bolstering its customer offerings, improving operational efficiency, and positioning itself for long-term growth. A key focus for the airline is its Seats-to-Suit offering, a flexible service designed to provide passengers with a range of seating options and add-on services tailored to their travel preferences. This initiative aims to enhance the customer experience by offering greater flexibility, while also allowing Air New Zealand to capture more value per passenger. The airline anticipates that this initiative will not only appeal to a wider range of travellers but also differentiate it in a competitive market.

Alongside its service innovations, Air New Zealand is investing in digital customer service improvements, with a particular emphasis on live chat capabilities. The airline has introduced this service to streamline customer support, enabling quicker and more efficient assistance. With customer service becoming an increasingly important competitive factor, this investment is designed to improve customer satisfaction while simultaneously reducing operational costs. By moving away from traditional call centres, Air New Zealand aims to create a more responsive service platform that delivers quicker resolutions for passengers, improving overall operational efficiency.

The airline is also focused on recovering its corporate travel segment, which has been slower to recover compared to leisure travel. Corporate travel was a key revenue stream pre-pandemic, and Air New Zealand is actively working to rebuild this market by offering tailored solutions for business travellers. This includes flexible booking options and priority services designed to meet the needs of corporate clients.

While the pace of recovery in corporate travel has been gradual, Air New Zealand views this as a critical component of its overall recovery strategy. Strengthening its corporate travel offering will help offset the decline in government travel, providing the airline with a more stable and diversified revenue stream.

Through these initiatives, Air New Zealand aims to not only assess the current challenges but also position itself for future growth.