Air NZ successfully navigates COVID turbulence with NZ$440 million loss

August 26, 2021
Air New Zealand
Photo: Airbus

Air NZ is navigating the COVID turbulence with a NZ$440 million (US$306.6m) loss for FY21 ending June 30 a significant improvement on the prior year.

Statutory losses before taxation, which include a NZ$29 million gain from other significant items, were NZ$411 million, compared to a loss of NZ$628 million last year.

The airline said that the financial result benefited from approximately NZ$450 million of Government assistance including airfreight support schemes as well as further subsidies and initiatives that are not expected to be repeated to the same extent in the 2022 financial year.

Ongoing border restrictions saw operating revenue decline by 48 percent to NZ$2.5 billion as international flying was significantly reduced, with capacity down 55 percent on the prior year, although cargo flying revenue grew by 71 percent compared to the prior year thanks to airfreight support schemes.

Air New Zealand said that its domestic business performed strongly, led by strong leisure demand as well as corporate customers flying at close to pre-Covid levels.

Chairman Dame Therese Walsh said the 2021 financial result reflected the reality of a year in which the airline was unable to fly two-thirds of its passenger network.

“In a severely constrained environment, Air New Zealand maintained cost discipline, focusing on delivering with excellence in the areas in its control. The return of a strong domestic business and growth in the cargo services that underpin our key export markets was a reminder of the airline’s crucial role in New Zealand’s infrastructure,” says Dame Therese.

“Air New Zealanders showed agility during constantly changing operating conditions, managing reopenings pauses and then closures while generating new revenue from additional cargo routes and increasing domestic and regional passenger capacity to match an increased demand for domestic leisure travel.”

Dame Therese paid tribute to the continued commitment and sacrifice of the Air New Zealand team.

“To keep New Zealand connected to key markets, help Kiwis continue traveling and manage continued disruption to passengers’ travel plans, Air New Zealanders have again proven their aroha for customers. From our airport employees and flight crew who are among the most frequently tested groups in the country, to all our other operations and corporate teams across the network who have worked tirelessly behind the scenes to keep our customers and cargo moving, their efforts have been extraordinary.”

“These efforts, after 18 months of reduced pay and forfeited incentives, were recognized earlier this year when we announced eligible employees would each be provided with a $1,000 award of shares or cash. With significant uncertainty ahead, including the current lockdown, this was an important recognition of the people who give so much to our business.”

Chief Executive Officer Greg Foran said the 2021 financial year was one in which the airline played the hand it was dealt, kept planes flying every day, and took some important steps in the delivery of its refreshed strategy, Kia Mau.

“Our people developed new capabilities and dexterity, adapting quickly when conditions changed. Although the return of long-haul travel seems some time away, the changes the team made this year will serve us well when it returns,” he said.

“We have reimagined our domestic business, increasing the choice of flight times and introducing greater price differentiation for peak and off-peak flying. This allows us to offer more lower-priced fares, which will unlock new demand for domestic tourism.”

“We capped fares to ensure travel isn’t out of reach when it’s needed most, reintroduced the popular Fast Bag service with new features, and improved our unaccompanied minors service to make travel easier for our most valuable cargo and safer for our people.”

The airline said that given the critical role that it plays in New Zealand’s economy and society, the Crown has again confirmed its longstanding commitment to maintaining a majority shareholding in Air New Zealand. Subject to the Cabinet being satisfied with the terms of the airline’s proposed capital raise at the relevant time, the Crown has again confirmed that it will participate in an equity capital raise by purchasing the number of new shares necessary to maintain a majority shareholding.

On completion of the recapitalisation expected next year, Air New Zealand expects to repay all amounts drawn under the Facility. The Crown has confirmed to the airline that it shares this expectation.

Until the capital raise is completed, the airline has access to sufficient liquidity under the Facility, with NZ$1.15 billion in remaining funds that allow it to continue operating and investing activities. Air New Zealand has drawn NZ$350 million on the Facility as of 25 August 2021 and expects to draw down further in the coming months.

The airline said that its operating cash flow for the 2021 financial year benefited from the one-off deferral of around NZ$254 million in Fringe Benefits Tax (FBT) and PAYE payments, which will start to be repaid in the 2022 calendar year. An additional NZ$60 million of FBT and PAYE is expected to be deferred in the first quarter of the 2022 financial year and repaid before 31 March 2022.