Iran war: Air New Zealand cops Moody's outlook downgrade as jet fuel prices soar
Tuesday, 28 April 2026
Air New Zealand’s outlook downgrade from ratings agency Moody’s will not have landed as a great surprise at the airline as fuel costs mount in the face of the ongoing conflict in the Persian Gulf.
Ratings agency Moody’s affirmed Air New Zealand’s Baa1 rating, but said the financial outlook for the national carrier was less rosy.
Jarden aviation industry analyst Grant Lowe said given the spike in aviation fuel prices Moody’s outlook downgrade was not a great surprise.
Air New Zealand suspended its earnings guidance last month due to unprecedented volatility in global jet fuel markets following the escalation of conflict in the Middle East.
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It also increased some fares in response to the escalating cost of fuel. Domestic fares had been increased $10 one way, short haul international fares were up $20 and a long haul economy fare would cost an extra $90.
Lowe said Air New Zealand was not yet at a stage where it needed to raise more equity, “but there's a reasonable chance of that”.
The other lever the airline could pull was deferring some of its capital expenditure.
Air New Zealand had about $3.4 billion of planned aeronautical spending over the next four or five years. “They could defer some of that, which might help them out.
“But a downgrade on the credit rating would not come as a surprise to any of the equity investors, at least,” he said.
Air New Zealand has previously warned if jet fuel costs continued to rise, fares would increase further and changes to services may also be needed. Ongoing cost reduction initiatives were expected to partially offset fuel cost increases.
The war in Iran has led to extreme volatility in jet fuel prices; from about US$85 to US$90 per barrel prior to the conflict, they had spiked to US$209 per barrel at the start of this month before falling back to about US$180 per barrel last week, according to industry body International Air Transport Association.
Air New Zealand’s ratings, which also included its baseline credit assessment at baa3 and its senior unsecured medium term note programme at (P)Baa1, kept the 51% state-owned airline within investment grade, reflecting its current credit strength and access to capital markets.
At its interim results on February 26, Air New Zealand said that, based on current trading conditions and assuming an average jet‑fuel price of US$85 a barrel for the second half of the financial year, it expects second‑half earnings to be broadly in line with, or slightly below, the first‑half result — a $59m loss.
Air New Zealand has warned the crisis was expected to meaningfully affect second-half earnings and it suspended guidance for the full year until fuel markets and operating conditions stabilised.