Quick summary
Air New Zealand suspended its full-year earnings guidance on March 10, 2026, after jet fuel prices spiked from $85–90 per barrel to $150–200 following the February 28 US-Israeli strike on Iran and subsequent regional escalation. The airline has implemented initial fare adjustments and warned that sustained high fuel costs could force network changes, though no routes have been canceled yet. Australian and New Zealand travelers face higher ticket prices on long-haul routes to Asia and Europe, with fuel representing 20–25% of operating costs now being passed through to fares.
The airline is 83% hedged against Brent crude for the second half of FY26 but remains exposed to refining margin volatility — the “crack spread” between crude oil and jet fuel that surged after Strait of Hormuz disruptions. Crude dropped to $84 per barrel on March 10 after US President Trump’s de-escalation comments, but Air New Zealand is the first Asia-Pacific carrier to pull guidance over the conflict.
Jet fuel volatility triggered by Middle East conflict has forced Air New Zealand to abandon its earnings forecast and raise fares, with the airline warning that prolonged high prices could reshape its route network.
The carrier announced the guidance suspension on March 10, citing “unprecedented fuel price swings” after a US-Israeli strike on Iran on February 28, 2026, sparked Iranian retaliation and Strait of Hormuz shipping disruptions. Jet fuel — which accounts for roughly a quarter of airline operating costs — jumped from pre-conflict levels of $85–90 per barrel to peaks of $150–200, mirroring the volatility seen after Russia’s 2022 invasion of Ukraine.
No routes have been cut yet. But Air New Zealand flagged potential schedule adjustments if fuel remains elevated, and passengers are already seeing fare increases on long-haul services to Asia, Europe, and North America as the airline passes costs through.
The airline reported a first-half FY26 pre-tax loss of NZ$59 million and is now consuming approximately 2.9 million barrels of fuel over the remainder of the fiscal year. While 83% hedged against Brent crude for H2 FY26, the carrier remains exposed to crack spread volatility — the refining margin that determines jet fuel’s final price — which surged independently of crude oil benchmarks.
Why hedging didn’t shield the airline
Air New Zealand locked in 83% of its Brent crude exposure for the second half of FY26, a standard risk management practice that protects against oil price swings. But jet fuel pricing involves two variables: the cost of crude oil and the refining margin required to convert it into aviation-grade kerosene.
That refining margin — known in the industry as the crack spread — spiked after the Strait of Hormuz disruptions reduced regional refining capacity and created supply bottlenecks. Even as Brent crude dropped to $84 per barrel on March 10 following US President Trump’s comments about potential de-escalation, jet fuel prices remained elevated because refineries couldn’t process crude fast enough to meet demand.
This is the same dynamic that caught airlines off guard in 2022, when Russian airspace closures and sanctions disrupted European refining. Air New Zealand is now the first Asia-Pacific carrier to suspend guidance over the February 28 escalation, though Europe’s Wizz Air cut its full-year forecast on March 5 for similar reasons.
| Date | Event | Jet fuel price (per barrel) | Impact |
|---|---|---|---|
| Feb 27, 2026 | Pre-conflict baseline | $85–90 | Normal operating environment |
| Feb 28, 2026 | US-Israeli strike on Iran | $120–140 | Immediate supply concerns |
| Mar 5, 2026 | Strait of Hormuz disruptions | $150–200 | Peak volatility, refining bottlenecks |
| Mar 10, 2026 | Trump de-escalation comments | $84 (crude), $110–130 (jet fuel) | Crude drops, crack spread remains elevated |
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What this means for fares and routes
Air New Zealand has already implemented initial fare adjustments, with long-haul economy tickets from Auckland to London, Singapore, and Los Angeles seeing increases of 5–12% depending on booking class and departure date. The airline hasn’t disclosed specific surcharge amounts, but industry practice suggests fuel cost recovery is being spread across all fare types rather than applied as a standalone fee.
Network changes remain on the table if fuel stays above $120 per barrel through mid-2026. The airline is reviewing schedule filings for potential frequency reductions on lower-margin routes, though no specific corridors have been named. Historically, Air New Zealand has prioritized its trans-Tasman and Pacific Island services during cost pressures, with long-haul Asia and North America routes more vulnerable to cuts.
Monitor fuel trends and schedule filings
Jet fuel prices remain the key variable. If crude stabilizes below $90 per barrel and refining margins normalize, Air New Zealand could restore guidance and hold current schedules.
- Check your booking status weekly via the Air New Zealand app or airnewzealand.co.nz — schedule changes typically appear 60–90 days before departure.
- Set fare alerts on Google Flights for your route to track whether prices are rising further or stabilizing.
- Review travel insurance coverage for fuel surcharges and schedule changes — most policies exclude fare increases but cover involuntary itinerary changes if the airline cancels or significantly alters your flight.
- Consider alternative carriers like Qantas, Singapore Airlines, or oneworld partners if Air New Zealand reduces frequencies on your preferred route.
Watch: Air New Zealand‘s April schedule filing will reveal whether any long-haul frequencies are being cut for the June–September 2026 period.
Questions? Answers.
Has Air New Zealand canceled any routes due to fuel costs?
No routes have been canceled as of March 10, 2026. The airline suspended its earnings guidance and implemented fare increases but has not announced specific schedule cuts. Network adjustments remain possible if fuel prices stay elevated through mid-2026.
Why did jet fuel prices spike if crude oil dropped to $84 per barrel?
Jet fuel pricing depends on two factors: crude oil cost and the refining margin (crack spread) needed to convert crude into aviation kerosene. The Strait of Hormuz disruptions reduced refining capacity, causing crack spreads to surge even as crude oil prices fell. Air New Zealand is 83% hedged against crude but remains exposed to crack spread volatility.
Will I get a refund if Air New Zealand raises fares on my existing booking?
No. Fare increases on new bookings carry no refund obligation. However, if Air New Zealand changes your booked flight by more than 2 hours or cancels it entirely, New Zealand consumer law requires the airline to offer rebooking or a refund. Australian travelers have similar protections under the Consumer Guarantees Act for material itinerary changes.
Which routes are most at risk of frequency cuts?
Air New Zealand has not named specific routes, but historically the airline prioritizes trans-Tasman and Pacific Island services during cost pressures. Long-haul routes to Asia, Europe, and North America — which have higher fuel exposure and lower load factors in off-peak periods — are more vulnerable to frequency reductions if fuel stays above $120 per barrel.
