Air New Zealand predicts deeper loss due to Aussie COVID lockdowns

August 05, 2021
Air New Zealand
An Air New Zealand A320neo. Photo: Air NZ.

Air New Zealand has predicted a wider pre-tax loss of up to $NZ530m million for the 2022 financial year due to COVID lockdowns in Australia.

The Kiwi carrier had previously predicted that its annual loss before tax and extraordinary items would be no more than $NZ450m — but that was before the New Zealand government announced quarantine-free travel between the two countries would be suspended for eight weeks.

The suspension was a reaction to lockdowns in several cities on Australia’s eastern seaboard due to cases of the delta COVID variant with the nation’s biggest city, Sydney, remaining shut down until at least the end of August.

The situation in New South Wales worsened this week with cases reaching a record 262 on Thursday and lockdowns imposed for a week in the Newcastle-Hunter area north of Greater Sydney.

The Qantas Group also announced this week it would stand down 2500 workers because of the lockdowns as operations slumped to 40 percent of pre-COVID capacity.

READ: Qantas to stand down 2500 as border closures continue.

“The airline continues to assess the impact of this temporary suspension on passenger demand, in conjunction with an expectation that demand on the Tasman may be slower to recover following the re-opening of a travel bubble and that there remains a risk of future suspensions,’’ Air New Zealand said in a stock market statement.

“This has resulted in Air New Zealand reassessing its 2022 financial year earnings expectations.”

The new earnings guidance assumes a fuel price of $US78 per barrel and an exchange rate of 70 cents between the New Zealand and US dollars.

The Australia-New Zealand market is a significant revenue generator for Air New Zealand and the suspension means a reduction in operating cash flow.

The carrier said that reduction and planned cash payments for aircraft in the coming months meant it expected to draw down further on a government standby loan facility before the end of this month.

However, it noted its operating cash flow remained positive due to continued domestic performance and a revenue boost from the New Zealand government’s Maintaining International Air Connectivity scheme, due to run until the end of October.

Cashflow had also benefited from a previously discussed one-off deferral of about $NZ310 in PAYE payments in the 2021 and early 2022 financial years, it said. Repayments on this are due to start in the 2022 financial year.

“Air New Zealand has not drawn on the facility since February 2021, therefore current drawings remain at $NZ350 million.’’ the airline said.

“As disclosed previously, the total available amount under the facility is $NZ1.5 billion, and therefore the company currently has remaining available funds of $NZ1.5 billion under the facility.”