Air New Zealand Sees More Losses as Virus Keeps Borders Closed
(Bloomberg) -- Air New Zealand expects to suffer at least three straight years of losses as the pandemic continues to keep international borders closed and severely restrict long-haul travel.
The airline will post a loss before significant items and tax of as much as NZ$450 million ($315 million) for the year ended June 30 and foresees a “comparable” result in the 2022 financial year, it said in a trading update Friday in Wellington. The carrier, which plunged to its first annual loss in 18 years in 2020, said while it has seen a strong and sustained recovery in domestic travel demand, long-haul passenger volumes remain less than 5% of pre-Covid levels.
“Despite the domestic market continuing to perform strongly and the fact that bookings on the Tasman and Cook Islands continue to build, a large degree of uncertainty remains,” Air New Zealand said. “The airline is not expecting any meaningful recovery in long-haul demand in the 2022 financial year, notwithstanding the roll out of global vaccination programs and the potential for long-haul borders to begin reopening progressively in the second half of the financial year.”
New Zealand has opened quarantine-free travel corridors with Australia and the Cook Islands, but a significant reopening of its border is not expected for some time. Prime Minister Jacinda Ardern aims to have a high percentage of the population vaccinated by the end of the year, but even then has spoken of a staged re-opening to other low-risk countries rather than a quick return to pre-pandemic travel norms.
Air New Zealand, which traditionally generates two thirds of its revenue from international travel, said it has renegotiated the delivery date for the first of eight new Boeing 787 Dreamliners, which were ordered in 2019 prior to the outbreak of Covid-19. The first aircraft is now due to enter the fleet in the 2024 financial year, a year later than initially planned.
Air New Zealand shares were little changed at NZ$1.61 at 10:18 a.m. in Wellington.
The Auckland-based airline, 52% owned by the government, has so far drawn NZ$350 million of a NZ$1.5 billion Crown loan. It plans to undertake a capital raise before Sept. 30 and use a portion of the proceeds to repay any amounts drawn under the facility.
Chief Executive Greg Foran said there have been achievements to celebrate in recent months.
The airline has had positive earnings since September and has been operating cash flow positive since the second quarter of the 2021 financial year, he said, although that performance had benefited from the government’s air cargo support schemes, wage subsidies and other aviation relief packages.
Air New Zealand has laid off about 4,000 staff since the onset of the pandemic. Foran said today that all 8,000 remaining permanent employees will be awarded NZ$1,000 worth of the company’s shares later this year in recognition of their efforts. In addition, after 15 months of reduced salaries, the airline will end employee salary reductions from July 1.
“The airline has its eyes firmly set on the future as we move out of the survive phase and into revival mode,” Foran said. This meant further strengthening the core domestic business and “maintaining the hard-won structural cost reductions made across our business from the outset of this pandemic,” he said.
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