Air New Zealand is reporting a net loss after tax of $454 million for its 2020 annual result.
It’s the airlines first loss in 18 years and is down 264.5% compared to a net profit in the previous year of $276m.
Its reported loss before other significant items and taxation was $87m compared to earnings of $387m in the prior year.
It also comes after a strong interim profit of $198m for the first six months of the financial year.
However, COVID-related travel restrictions resulted in a 74% drop in passenger revenue from April to the end of June compared to the prior year, which drove the airline’s historic losses.
Non-cash items of $453 million reflected most of the other significant items, including the $338 million aircraft impairment charge related to grounding of the Boeing 777-200ER fleet for the foreseeable future.
The company is now securing extra liquidity, reducing cash burn and deferring significant capex spending.
Its current short-term liquidity is around $1.1 billion, made up of cash and a $900m standby loan from the Government.
The airline has still not used the Government loan facility due to a “better than expected” return to domestic demand. However, it says it will start drawing on these funds in the coming days.
Cash burn averaged around $175m per month from April to June and reduced to $85m for July. Going forward, it estimates monthly cash burn to be in the range of $65m to $85m while international travel restrictions remain and assuming resumption of domestic travel with no social distancing requirements, as well as a continuation of government-supported cargo flights.
Air New Zealand chairman Dame Therese Walsh says she is proud of the way the business has responded to this crisis, including the way it moved quickly to ramp up domestic and cargo services.
The company now has 50 flights per week under the International Airfreight agreement signed with the Ministry of Transport in late April.
The cargo services ensure key goods such as medical supplies and food continue to flow in and out of New Zealand.
“The 2020 financial year has been a year of stark contrast. Air New Zealand had a solid start to the year and was focused on driving profitable growth into the second half. We were also preparing to launch the first ever non-stop link between New Zealand and New York and had announced several exciting innovations in the customer experience space,” Walsh says.
“Now, nearly six months following the declaration of a global pandemic, the $87 million loss we are reporting today, our first loss in 18 years, reflects the quick and severe impact Covid-19 has had on our business,” she says.
Air NZ chief executive Greg Foran says the core strength of the airline is its people and their ability to respond to change quickly.
“I am in awe of the dedication, perseverance, and professionalism of Air New Zealanders across the business and never cease to be amazed at the resilience and strength of our people as we work our way through this crisis.
“Whether it be volunteering to crew repatriation flights to unfamiliar ports, dealing with substantial increases in volume at the call centre, or our cargo team’s efforts to keep New Zealand exporters connected to global markets, the response of our people has been nothing short of remarkable” he says.
“I also recognise this has been a particularly trying time for our customers with the mass cancellation of flights and continuing uncertainty regarding international travel. I would like to apologise sincerely for the fact that we didn’t live up to customers’ expectations in the way we handled the processing of customer credits. I would also like to thank our customers for their ongoing support and patience,” Foran says.
“In the airline’s 80-year history we have faced many challenges and emerged from each one stronger than before. We entered this crisis in an enviable position, and with our core domestic network, I believe we are better positioned for recovery than many of our airline peers.
“But given the restructuring and consolidation we had started to see within the global aviation industry, we need to be hyper vigilant and protect our core competitive advantages. It is clear that Covid-19 is unlike any other crisis the aviation industry has experienced and we will need to be more nimble than ever as borders reopen,” Foran says.
