Financial Performance - Air New Zealand's operating revenue reached $6.8 billion, consistent with the previous year[35] - Earnings before taxation (EBT) decreased by 15% to $189 million[35] - Net profit after taxation (NPAT) declined by 14% to $126 million[35] - The company declared full year unimputed ordinary dividends of 2.5 cents per share[35] Operational Challenges and Mitigation - Aircraft availability challenges resulted in an estimated $165 million adverse impact on 2025 earnings, partially offset by $129 million in compensation[11,37] - Transformation initiatives delivered approximately $100 million in EBITDA benefits in 2025[23] - The airline is actively managing aircraft availability due to global engine maintenance delays, with up to 11 aircraft grounded out of a 60 jet fleet in 2025[27] Capacity and Demand - Available Seat Kilometers (ASKs) decreased by 4%[11] - Passenger numbers decreased by 3% to 16 million[11] - Loyalty members increased by 9% to over 5 million[12] Future Outlook - The airline anticipates a 2% to 4% increase in group capacity in 2026, equating to approximately 90% of pre-Covid capacity[77] - Fuel costs for 2026 are estimated at approximately $1.5 billion, assuming a jet fuel price of US$85 per barrel, with approximately 70% of volumes hedged[79,105] - Continued price increases in landing charges, aviation security, and air navigation for 2026 are expected to result in approximately $85 million (13%) incremental cost[79]

Financial Data and Key Metrics Changes - The company reported record results in Q2 across all metrics: sales increased by 2% to $1.1 billion, adjusted operating income rose by 9% to $297 million, return on sales (ROS) expanded by 170 basis points to 26.4%, and adjusted EPS increased by 14% to $1.39 [8][15][22] - Free cash flow reached a record $596 million, up 14% year over year, with a net debt leverage ratio of 1.2 times, down from 1.6 times a year ago [20][21] Business Line Data and Key Metrics Changes - **Flow Segment**: Sales were flat year over year, with residential sales down 1% due to higher interest rates impacting the residential market, while commercial sales rose by 1% [16][18] - **Water Solutions Segment**: Sales declined by 4% to $298 million, primarily due to lower volume, with commercial sales down 3% and residential sales down 6% [18][19] - **Pool Segment**: Sales increased by 9% to $427 million, driven by price, volume, and the acquisition of Gulfstream [19] Market Data and Key Metrics Changes - The company anticipates flow sales to grow in the low single digits, while water solutions are expected to decline in the mid single digits, and pool sales are projected to increase by approximately 6% to 7% for the full year [22][23] Company Strategy and Development Direction - The company is focused on transformation initiatives and strategic growth, including investments in high-performing talent and new product innovations [10][13] - The company aims to achieve $80 million in transformation savings for 2025 and targets a ROS of 26% by the end of 2026 [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that the softer residential end market allows the company to improve overall business positioning for when demand recovers, with expectations that lower interest rates will catalyze an improving housing market [11][14] - The company remains agile in a rapidly changing macroeconomic and geopolitical environment, with a strong balance sheet and capital allocation strategy [26] Other Important Information - The company made an investment in a startup, Hope Hydration, to deliver free water through digitally connected refill stations, which aligns with its sustainability goals [9] - The company updated its full-year guidance, expecting sales growth of approximately 1% to 2% and adjusted EPS of approximately $4.75 to $4.85 [22][24] Q&A Session Summary Question: Insights on pool unit volumes and pricing sensitivity - Management indicated that new pool builds are expected to be modestly down, with customers extending product life through repairs rather than new purchases, influenced by pricing increases [32][33] Question: Price versus cost outlook for the year - Management clarified that pricing is expected to offset tariffs, with a net benefit from lower tariffs and staggered pricing strategies implemented [35][36] Question: Pool volume outlook and channel inventories - Management confirmed that pool volume expectations have slightly shifted to a more challenging outlook, but channel inventories are being monitored effectively [86][87] Question: Impact of tariffs on pricing and future increases - Management stated that they are prepared to react to any tariff changes and will work with dealers to recover costs as needed [89] Question: Divestiture of the commercial services business - Management explained that the decision to divest was based on changing dynamics and a focus on higher-margin businesses, with no expected loss in aftermarket sales [62][95]