Auckland International Airport's (NZE:AIA, ASX:AIA) recovery is happening slower than expected due to disruption from the Middle East conflict, with June passenger statistics indicating volumes declining by 4.5% for domestic and 3.8% for international, Jefferies said in a Wednesday note.

Passenger growth fell short of fiscal 2026 forecast as domestic passenger volumes grew by only 1.7% compared with the expected 2%, impacted by the decline in June.

International passenger growth was only 1.6%, lower than the expected 3%, with the Middle East conflict causing a 62% drop in passenger volumes on affected routes, Jefferies said.

However, flight capacity is expected to rebound in the next few months as Air New Zealand's (NZE:AIR, ASX:AIZ) wide-body aircraft constraints ease and Middle Eastern routes slowly recover.

The recovery will also be supported by new incoming services from international carriers such as Thai Airways, Air Niugini, and Starlux.

Jefferies reaffirmed its hold rating on Auckland International Airport and raised its price target to NZ$8.65 from NZ$8.49.

Auckland International Airport shares fell nearly 2% in recent New Zealand trade on Thursday and 1% in Australia.