COVID-19 hammers Air New Zealand with $900m blow

Air New Zealand says a recovery is looking anything but V-shaped after COVID-19 blew a $900m hole in its bottom line and brought its first annual loss in 18 years.

Air New Zealand CEO Greg Foran has warned the recovery from COVID is likely to be long and uneven. Picture: Getty Images

COVID has delivered a $900m blow to Air New Zealand’s bottom line with the airline sinking to its first loss in 18 years.

The kiwi carrier has announced an overall loss of $578m ($NZ628m) before tax for the 2020 financial year, down from last year’s $349m profit.

The underlying loss was $80m, down from a $354m profit in the 2019 financial year.

With cash liquidity of just over $1bn, the airline was expected to start drawing on a $823m loan facility from the New Zealand Government in coming days.

Chief executive officer Greg Foran, who only took up the role in February, said “to say it had been an incredibly challenging six-months was putting it mildly.

“Within the course of a few short weeks we went from transporting 330,000 passengers a week to 8000 a week,” Mr Foran said.

“And six months into this crisis it is certainly not looking like it will be a V-shaped recovery.”

The airline’s cash burn had averaged about $160m a month from April to June due to higher than average refunds, redundancy payments and fuel hedge close out costs, but this had reduced to $77m in July.

Going forward, Air New Zealand expected the monthly cash burn to be in the range of $59m to $77m while international travel restrictions remained.

Already more than 4000 jobs have been lost from Air New Zealand, representing 30 per cent of the workforce.

Mr Foran said it was encouraging to see strong domestic demand when restrictions were eased in June and July.

But the reinstatement of restrictions in early August demonstrated the uncertain environment in which the airline was now operating.

“In the airline’s 80-year history we have faced many challenges and emerged from each one stronger than before,” Mr Foran said.

“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.”

Air New Zealand chairman Dame Therese Walsh said it had been a year of stark contrast with the airline making a solid start to the year, and planning to launch historic non-stop flights from Auckland to New York.

“Now, nearly six months following the declaration of a global pandemic, the $80m (underlying) loss we are reporting today, our first loss in 18-years, reflects the quick and severe impact COVID-19 has had on our business” Dame Therese said.

“Faced with such a swift decline in revenue as lockdown restrictions were implemented and borders were closed, we took immediate steps to secure $NZ900m in additional funding, and drastically reduced our cash burn in the knowledge that, for a time, we would be a much smaller business than we had been pre-COVID.”

No specific guidance was provided for the 2021 financial year due to the uncertainty of the COVID crisis but another loss was expected.