PBT fell 14.9% on flat revenue as working-capital build doubled the historical

The working-capital build of NZ$33m was the most structurally notable feature: it is NZ$20m above the company's historical average build of NZ$13m across the prior three full years, and sits above the normal range. Inventories rose NZ$34m (26%) to NZ$165m, which explains the bulk of the absorption.

Operating cash flow rose 16% to NZ$940m, but this was supported partly by the elevated working-capital position rather than operating profit growth. Pre-lease FCF of NZ$160m was within the company's historical range, though well below the three-period mean of NZ$498m.

The final dividend declared was 1.25 cents per share unimputed. The full-year ordinary dividend totals 2.5 cents per share across the interim and final components.

The NZ$33m operating working-capital build — driven mainly by a NZ$34m inventory increase — is the largest in the company's recent history and 2.5 times the prior-period average. Elevated inventory levels are consistent with management commentary about a grounded-aircraft position that is expected to improve only slowly. If capacity normalises and inventory is not drawn down, the build will persist as a structural drag.

PBT decline on flat revenue points to cost-side deterioration, not demand weakness. Revenue was essentially unchanged while PBT fell NZ$33m (-14.9%). Because the historical PBT growth series carries a basis discontinuity that makes it not analytically comparable across periods, the directional read relies on the absolute decline rather than trend framing. Management commentary cited a 4% reduction in passenger volumes and lower fuel consumption in line with constrained capacity, alongside New Zealand CPI pricing pressure expected to persist. The PBT margin of 2.8% is above the three-period mean of -5.8%, but the directional move is negative on a flattening revenue base.

The second-half earnings contribution collapsed relative to the first half. HY25 delivered NZ$106m of NPAT — 84.1% of the full-year NZ$126m — leaving an implied second-half NPAT of only NZ$20m. This degree of first-half skew is unusual for an airline that normally benefits from southern-hemisphere peak travel in the second half, and is directly attributable to the grounded-aircraft position constraining second-half capacity.

Management noted that the grounded-aircraft position is expected to improve slowly, and that international demand trends remain strong. The airline stated that FY25 NPAT of NZ$126m was within the guidance range provided to the market in April 2025.

The sharp first-half/second-half NPAT skew (84%/16%) sets a difficult base for HY26 unless capacity recovers. Pricing pressure in the domestic market tied to the New Zealand CPI, combined with a persistent inventory build, means cash generation could remain below potential even if NPAT stabilises. This briefing does not have access to fleet reinstatement timing or hedging positions that would resolve the forward earnings range.

Pre-lease FCF of NZ$160m — after NZ$780m capex — is the more relevant free-cash measure and represents a 127.0% conversion of NPAT, which is above the prior comparable FCF-to-NPAT conversion of 13.0%. However, the prior year FCF was unusually low (NZ$19m versus a three-period median of NZ$223m), so the current result's apparent improvement partly reflects base effects.

The NZ$33m inventory-driven working-capital build is the primary quality concern: it absorbs cash without generating revenue, and is likely to recur while the grounded-aircraft position remains unresolved. Gross borrowings fell NZ$116m to NZ$1.3b and the balance sheet moved to a net cash position (estimated net debt of -NZ$159m), which supports financial flexibility but does not offset the operating earnings weakness.

This briefing cannot assess fleet reinstatement schedules, maintenance contract terms, fuel hedge positions, or the specific route economics driving the second-half earnings collapse.