Air New Zealand has just reported a NZ$185 million loss before taxes and other significant items for the second half of 2020. This is a steep decline when compared to their NZ$198 million profit for the same period in 2019. It brings the full financial year’s statutory loss to NZ$575 million. This decline is however less severe than the results of Qantas that has announced a A$1.47 billion loss for the same period.
The Air New Zealand loss has been attributed to the harsh impact of the Covid-19 pandemic on the global and domestic aviation industry. The airline also pursued aircraft impairment and lease modifications that cost $39 million. A further $338 million worth of aircraft write-downs was accounted for in 2020.
Despite this decline, Air New Zealand CEO, Greg Foran, has remained positive and considers the airline fortunate as compared to global peers. He confirmed that the domestic and cargo business had done much to boost the airline’s performance. While international flights have virtually come to a standstill, domestic flights are reported to have risen to 76% of pre-Covid levels and cargo revenues grew by 91%.
According to Foran, the airline had achieved 1,800 flights during this second half of 2020, moving four million passengers domestically. The airline did however suffer a 59% drop in operating revenue to NZ$1.2 billion during this same period.
In February the airline had short term liquidity of about NZ$700 million. This was made up of about NZ$170 million in cash and NZ$550 million in undrawn funds from a NZ$900 million Crown loan. The loan attracts an interest of between seven and nine per cent and is available to the airline for 24 months from granting in March 2020.
The interest rates are however to increase by one per cent if still unpaid after 12 months. The loan agreement also allows for its conversion to equity if requested by the Crown. The loan has cost the airline NZ$12 million in interest for the six months leading up to December 30.
Despite the progress made on the domestic side, the airline has expended over NZ$1 billion of its cash reserves since the start of the pandemic. This has partially been offset by wage subsidies and the government aviation relief package. The fall in fuel prices has also helped, though this is expected to abate in 2021.
To cope with the challenges, the airline undertook several measures including instituting stricter cost management and laying off a third of its staff. Cash burn was reduced from a previous high of NZ$175 million to NZ$79 million per month from September to January 2021. This figure is expected to fall even lower to NZ$45-55 million in the period leading up to June 30. The airline also intends to make adjustments to its widebody fleet in the coming months.