Air NZ reports $289 million loss amid Covid-19 disruption

Source: 1News

Air New Zealand has reported a $289 million loss, as the ongoing impacts of the Covid-19 pandemic sees its revenue nearly halved.

Auckland, New Zealand - November 15 2019; Air New Zealand aircraft parked at Auckland airport.

The national carrier’s full year loss for the year to June 2021 is lower than that of the 2019/20 financial year, where it saw a $454 million loss because of asset write-offs and other one-off costs.

It reported a $2.5 billion operating revenue, down 48 per cent on the prior year.

Loss before taxation is at $411 million. For the last financial year, that figure was $628 million.

Liquidity as of August 24 is at $1.3 billion. This is made up of $183 million in cash and $1.15 billion of undrawn funds from the Government’s standby loan to Air New Zealand.

The airline expected it would draw more funds from the standby loan “in the coming months”.

Air NZ reported that domestic capacity rebounded strongly as the year progressed, reaching 93 per cent of pre-Covid for the three months ending July.

This was due to a strong demand for leisure and the return of corporate customers.

International flying capacity is down 55 per cent compared to the prior year. Cargo flying revenue grew by 71 per cent compared to the previous financial year because of the Government's airfreight support scheme .

Chief Executive Officer Greg Foran said the results were somewhat expected.

“I was expecting that we would be where we ended up. We got there a bit differently, I may add. We flew a few less passengers but did more cargo,” he told 1 NEWS.

Foran said while the return of long-haul travel seemed “some time away”, “the changes the team made this year will serve us well when it returns”.

“We have reimagined our domestic business, increasing the choice of flight times and introducing greater price differentiation for peak and off-peak flying. This allows us to offer more lower priced fares, which will unlock new demand for domestic tourism.

“We capped fares to ensure travel isn’t out of reach when it’s needed most, reintroduced the popular Fast Bag service with new features, and improved our unaccompanied minors service to make travel easier for our most valuable cargo and safer for our people.”

Chairman Dame Therese Walsh said the 2021 financial result reflected the “severely constrained environment” ongoing border disruptions had, which meant the airline wasn’t able to fly two-thirds of its passenger network.

“Air New Zealand maintained cost discipline, focusing on delivering with excellence in the areas in its control.

“The return of a strong domestic business and growth in the cargo services that underpin our key export markets was a reminder of the airline’s crucial role in New Zealand’s infrastructure,” Dame Therese said.

The airline’s operating cashflow for the 2021 financial year benefited from the one-off deferral of around $254 million in Fringe Benefit Tax and PAYE payments. These will start to be repaid in the 2022 calendar year.

An additional $60 million of Fringe Benefit Tax and PAYE is expected to be deferred in the first quarter of the 2022 financial year and repaid before March 31, 2022.

Air NZ has also suspended its 2022 earning guidance “given uncertainty surrounding the current national lockdown” and uncertainty over international travel restrictions.

After consultation with the Crown, the airline is also deferring its planned equity raise until the first quarter of the calendar year of 2022.

“Subject to Cabinet being satisfied with the terms of the airline’s proposed capital raise at the relevant time, the Crown has again confirmed that it will participate in an equity capital raise by purchasing the number of new shares necessary to maintain a majority shareholding,” the airline said.

“On completion of the recapitalisation, Air New Zealand expects to repay all amounts drawn under the Facility [the Government standby loan] The Crown has confirmed to the airline that it shares this expectation.”

The airline isn’t expecting to pay a dividend.