Market News - 11 May 2026

Johnny Lee writes:

The collapse of US budget airline Spirit Airlines has raised two important questions for investors, one regarding the short-term future of aviation, and the other contemplating the more philosophical question of anti-competition regulation and its role in the modern economy.

Spirit Airlines was an “ultra-low-cost airline”, similar to RyanAir in Europe or arguably Jetstar more locally. Spirit sought to offer lower prices than its peers, in exchange for reduced service and charging fees for options such as food or a paper ticket.

This business model was placed under extreme stress in March following the conflict in the Middle East and the closure of the Strait of Hormuz. The soaring oil price led to the company making huge short-term losses, an experience shared by most aviation companies at the moment.

Spirit had also developed a reputation for poor service over the years, with formal surveys ranking them among the lowest for customer satisfaction. One survey from 2025 ranked Spirit as having the worst corporate reputation in the United States.

Spirit had encountered financial difficulties a number of times in its history, even filing for bankruptcy on several occasions. The airline had raised alarm bells as recently as mid-April, formally seeking a bailout from the US Government in exchange for a controlling stake in the company. However, by May 1, the company had announced immediate cessation of all activities and by May 2 the company had flown its last flight.

Whether Spirit’s collapse is due to jet fuel pricing, reputation or a third possible reason, discussed below, will be up for debate. 

What is undeniable is that airlines, including our own Air New Zealand, will be facing intense short-term stress at present. The elevated cost of fuel is forcing all airlines to reconsider their staffing and capacity requirements and cutting back services which simply cannot be run profitably.

Locally, the effects have been notable. Air New Zealand has now completed a third round of domestic route cuts and has already begun lifting prices for forward sales. 

This stress is being reflected Qantas’ share price is down 20% this year, while Ryanair is down 27%. Air New Zealand has fallen 30%.

For Air New Zealand, analysts are now expecting the company to announce significant losses this year, with further losses anticipated in 2027. This decade had already been one to forget for the company, with a string of large losses throughout the COVID period. 

The difficulty now will be in how the company can recoup the losses it has made. While the obvious answer may be to “lift prices”, this will act as a significant disincentive for travellers, especially those with flexibility around their travel.

Government ownership will be helpful, especially if conditions worsen and additional capital is required. Fortunately, the taxpayer has consistently expressed its availability for such bailouts, citing the necessity of having a national airline.

Ideally, conditions across the Strait of Hormuz moderate and the oil price stabilises nearer January levels. From there, discussions can be had with regards to insulating the airline from future shocks, if at all possible. Share buybacks, which were a feature of the company’s capital programme just last year, may need to be shelved.

The second thought for investors to consider is that of anti-competitive behaviour and the legislation surrounding this topic. 

Spirit received a bid from a competitor, JetBlue, in 2022. Its shareholders voted to approve the deal. However, the US administration at the time blocked the takeover in 2024, citing fears that allowing two competitors to merge would result in less competition.

Some now argue that the decision to block the takeover has contributed to the failing, itself resulting in reduced competition.

This is never an easy decision for regulators. The benefit of hindsight is not available when these judgment calls are made, and no one in 2024 would have foreseen the events occurring now across the Middle East.

Such regulatory interventions are rare in New Zealand. Auckland Airport, Sky TV and The Warehouse are examples where regulators have blocked corporate activity, usually on “Market power” or “National importance” grounds. More recent transactions, such as the Contact Energy tie up with Manawa, or the Gull merger with NPD, have seen approval.

The collapse of Spirit Airlines should serve as a reminder for investors, particularly those persisting with an Air New Zealand shareholding. Conditions for the sector are clearly difficult, and 2026 is unlikely to be stellar year for shareholders.

Air New Zealand next reports in August.

a2 Milk

Three other major developments occurred last week, each of which saw significant price movements across the New Zealand market.

The first announcement came from a2 Milk, which announced a voluntary recall of some of its USA label Infant Milk Formula product.

The recall follows the detection of cereulide in a small batch of its products, manufactured by Synlait Milk. Cereulide can induce nausea and vomiting shortly after ingestion, and although there have no incidents yet of infant illness as a result of the contamination, the company is taking no chances and is recalling all 63,078 tins in the batch.

Cereulide contamination has led to at least two other infant formula recalls this year, with both Nestle and Danone recalling product in January.

While the recall is not financially relevant to a2, Infant Milk Formula is a very sensitive market and maintaining a strong reputation for safety standards is a crucial part of the trust in the sector, especially for an exported product.

The share price of ATM fell 10% following the announcement, shedding about $600 million of market capitalisation. Year to date, the share price is down 25%. 

Gentrack

The second market development came from technology company Gentrack, which provided a market update, formally downgrading its earnings expectations.

Gentrack now expects revenue of between $229 million and $238 million, about 10% lower than previous guidance late last year. This compares to 2025’s figure of $230 million.

On the same announcement last week, Gentrack announced its intentions to initiate a buyback of its shares. This has been partly driven by an apparent surplus of cash on hand, and a view that the share price remains well below fair value. The full year update last year reported a net cash position of $85 million.

The share price has plummeted this year, marking it as one of the worst performers of 2026. Over the last 12 months, the share price is down around 70%, seeing the market capitalisation move from $1.3 billion to today’s figure of nearer $450 million. 

The company has framed the update as “prioritising growth and global leadership over short term EBITDA”. While the market did not reward this decision, the question now will be whether the enormous decline in value is justified, and whether the company can rebuild confidence in its ability to convert opportunity into sustainable, recurring revenue.

Infratil 

The last development of note was a more positive one, after Infratil announced the signing of a major new customer within its data centre business, CDC. 

CDC is 49.7% owned by Infratil.

The new contract is for 30 years, and the 555-megawatt capacity will bring CDC’s total contracted capacity to over 1 gigawatt. This new deal is almost half of the total operating capacity currently in Australia.

The identity of the customer was not disclosed in the agreement, beyond being “US-based”. 

The deal will be transformative for Infratil and is expected to be part of a strategy to deliver $2 billion of EBITDAF once fully deployed. It is simply an outstanding achievement, and further cements Infratil as one of the great success stories across our listed market.

The agreement will, of course, require significant investment from CDC. Infratil’s announcement stated that CDC now expected capital expenditure to be approximately $4 billion in the next financial year. This will not require further shareholder equity, although Infratil stresses that this is based on CDC’s “current growth plan”. 

CDC recently received a credit rating from Moody’s, which has improved access to funding and given the company more options to fuel its growth. 

It would be fair to say that data centres are a controversial topic for some. Whether with respect to the environment impacts of operating the centres, the use of Artificial Intelligence across society or simply the sustainability of the growth seen in the sector, data centres are a huge part of the global growth story. The proliferation of these facilities has led to some impressive share price growth, especially in the US. 

Infratil’s share price soared on the news, rising above $15 a share to a new record high. With almost exactly a billion shares on issue, this $15 billion valuation places it behind only Meridian ($15.7b) and Fisher and Paykel Healthcare ($21.1b), having now surpassed Auckland Airport ($14.4b).

At a time when most growth stocks are struggling, Infratil continues to find success with its data centre business. If these developments conclude successfully and these long-term revenues begin to accumulate, further share price gains are likely to follow. 

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Chris Lee & Partners Limited

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