“Our data suggests that domestic fares were already experiencing robust inflation ahead of the fuel price spike.”
Bowley said increased demand and higher aviation system costs and levies were likely reasons for that.
Airlines pay a variety of fees to airports, Aviation Security, and air traffic controllers.
Bowley and Lockwood said they assessed long-haul booking windows out to a maximum of 270 days, compared to domestic, running from seven to 90 days.
Travellers typically book long-haul tickets further in advance, given the cost and effort involved in such travel.
The airline’s long-haul destinations are in North America and Asia and include New York, Vancouver, Tokyo and Shanghai.
Bowley and Lockwood said quoted prices had “increased materially” in recent weeks.
That would help soften the impact from higher fuel costs, but could also dampen demand.
Bowley and Lockwood expected Air New Zealand to make a $41.1m profit in the 2028 financial year, which starts on July 1, 2027.
They expected the airline’s jet fuel bill to go from $1.77 billion this financial year to $1.83b next, before falling to $1.57b in the year to June 30, 2028.
The airline last month said for someone flying one-way in economy, its domestic flights had increased by $10, short-haul flights by $20 and long-haul flights by $90.
Last week, Air New Zealand chief executive Nikhil Ravishankar said the airline’s fuel bill had more than doubled, costing an extra $4.5m a day.
The airline said it was pencilling in more schedule changes for May and June, affecting about 1% of customers.
Air New Zealand said it was activating targeted fare increases and adjusting the schedule, including combining lower-demand services where possible.
Fewer domestic trips forecast
The Forsyth Barr analysts predicted a roughly 5% reduction in available seat kilometres (ASKs) for the airline’s domestic segment, down from 6.41 billion last year to 6.36 billion this year and 6.05 billion next year.
ASKs are calculated by multiplying total available seats by distance flown.
Bowley told the Herald the forecast for ASKs was based on assumptions jet fuel prices would push up costs and dampen demand.
Even a resumption of normal oil flows through the Strait of Hormuz was not expected to bring jet fuel prices down for several weeks or more.
Aviation Industry Association (AIANZ) chief executive Simon Wallace said airlines could not just keep passing jet fuel costs on to customers.
“What we’re starting to hear from more broadly about customers is resistance to any further increases in fares or prices,” Wallace said.
“It gets to the point where it becomes unaffordable,” he added.
“People either won’t travel or they’ll drive if they can, and they won’t even drive now because of the costs. So it’s a dampener on the whole economy.”
Wallace said high fuel prices were hitting regional carriers and flight training schools especially hard.
Simply hoping for the war to end and prices to come back down was “not a strategy”, he said.
“We’ve been working on the aviation-specific fuel response plan with MoT [the Ministry of Transport].”
He said that plan was likely a week or two away.
Demand for many long-haul routes was still solid, House of Travel chief executive David Coombes said earlier this month.
“While the current geopolitical landscape is not business as usual, our booking data since the start of the Middle East conflict shows that customers are thinking carefully about how and where they travel rather than hitting pause altogether,” Coombes said.
Leisure inquiries early this month were 26% ahead of the same time a year earlier for House of Travel.
Cancellations were low but agents were having longer, more detailed conversations with customers, Coombes said.
Leisure bookings to Europe were up year-on-year.
Air New Zealand rival Qantas in a market update yesterday said exposure to jet fuel price volatility was to blame for fare hikes and capacity changes.
Qantas also said there was strong demand for trips to Europe.
John Weekes is a business journalist covering aviation. He previously covered consumer affairs, crime, politics and courts.
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