Iran conflict sends Air New Zealand fuel costs soaring

Friday, 6 March 2026

Air New Zealand faces a dramatic increase in its fuel costs as the war in Iran continues, potentially blowing out its losses for the full year, analysts say.

The national carrier, which reported a first half-year loss last month, faced greater near-term losses if current oil market conditions persist, Forsyth Barr analysts said in a client note.

“The Middle East conflict has had a dramatic impact on the jet fuel price, significantly more so than the impact on crude oil,” analysts Andy Bowley and Hugh Lockwood wrote.

The growing gap between the two, referred to as the crack spread, was concerning for the global aviation industry, the pair said.

“Consequently, the alarming rise in the crack spread over the past two days could dramatically impact Air New Zealand’s bottom line,” they said.

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The airline carrier last month reported a $40 million after-tax loss for the first six months of the year, compared with an $98m bottom line profit a year earlierand signalled trading conditions would not improve over the rest of the year.

The loss was greater than the airline had forecast when it said in October its pre-tax losses would be between $30m to $55m mainly because of a $13m hit from higher-than-expected fuel prices in the second quarter.

Air New Zealand hedges its fuel price to safeguard against cost fluctuations.

But the analysts estimated Air New Zealand’s daily fuel cost could rise by about $4m to $5m per day due the war in Iran, “and this for a business that is currently loss-making”.

The crack spread added an estimated $55m to the airline’s fuel bill in the first half of the 2026 financial year, at an average level of about US$22 (NZ$37) per barrel compared with the same period year earlier.

The dramatic increase overnight from an already elevated US$45 per barrel about US$140 was unprecedented, they said.

Air New Zealand bought 22,000 barrels of jet fuel a day to keep its fleet flying.

The board ordered a full strategy review when new chief executive Nikhil Ravishankar took over the top job in October. The review is due to be completed in a few months.