Air New Zealand has announced a NZ$100 million share buyback, a move signalling confidence in its financial health despite a challenging operating environment. The decision comes as the airline reported a 17.8% drop in first-half profit, driven by ongoing fleet maintenance issues and global aviation supply chain constraints.
Navigating Financial Headwinds with Shareholder Returns
The national carrier’s net profit after tax fell to NZ$106 million for the six months ending December 31, 2024, down from NZ$129 million a year earlier. Despite the decline, the result exceeded analyst expectations of NZ$101.6 million, reinforcing the airline’s resilience amid industry turbulence.
Air New Zealand Chair Dame Therese Walsh emphasised that the buyback reflects the company’s confidence in its financial strength. “The share buy-back programme we have announced today reflects our confidence in the strength of Air New Zealand’s fundamentals and our commitment to delivering value to our shareholders while ensuring we remain well-positioned for the future,” Walsh said in a statement to the New Zealand Exchange (NZX).
At the airline’s closing share price of 62.5 cents on Wednesday, the buyback could account for up to 160 million shares, representing approximately 2.5% of the company’s total issued capital. The buyback, structured under the Companies Act, will also include off-market acquisitions to ensure the New Zealand government maintains its 51% majority stake.
Why Buy Back Shares Now?
Share buybacks are a common capital management tool often used to return value to shareholders, boost stock prices, and signal confidence in future performance. While Air New Zealand’s financial performance has softened, the company maintains a strong balance sheet and liquidity, allowing it to navigate near-term pressures while rewarding investors.
Alongside the buyback, Air New Zealand declared an interim dividend of 1.25 New Zealand cents per share, further reinforcing its commitment to shareholder returns. The dividend will be paid on March 19 to shareholders on record as of March 7.
Challenges Looming Over 2025
Despite its optimistic outlook, Air New Zealand faces significant operational challenges. The airline warned that up to 11 aircraft could be grounded at times in the second half of fiscal 2025, impacting its full-year earnings.
The fleet disruptions stem from global engine maintenance delays, particularly affecting the Airbus A320neo and Boeing 787 Dreamliner aircraft powered by Pratt & Whitney and Rolls-Royce engines. CEO Greg Foran acknowledged the difficult year ahead, stating that 2025 would be the first full 12-month period with substantial fleet disruptions.
In response to ongoing maintenance constraints, Air New Zealand has also been forced to cut routes, including its Seoul service, which will be discontinued by March 2025 due to engine shortages.
Market and Industry Implications
Investor reaction to the buyback could be positive, as share repurchases reduce the number of outstanding shares, potentially driving up the stock price. The move also signals management’s confidence despite operational headwinds.
More broadly, the aviation industry continues to grapple with post-pandemic recovery challenges, including supply chain disruptions and aircraft maintenance bottlenecks. Air New Zealand is not alone in facing these pressures—other regional airlines are dealing with similar fleet availability issues, particularly those operating aircraft reliant on the same troubled engine manufacturers.