Air New Zealand has limited its half-year loss to just $185 million as it looks to blue skies.
The airline’s loss number is before tax and other significant items compared to earnings before other significant items and taxation of $198 million for the same period last year.
Statutory losses before taxation of $104 million include an $81 million gain from other significant items, compared to a $139 million profit before taxation for the first half of the previous financial year.
It said that the continuation of significant restrictions on international travel to and from New Zealand saw the airline’s operating revenue decline 59 percent to $1.2 billion in the first six months of the financial year, as network flying was substantially reduced by 65 percent.
Chief Executive Officer Greg Foran says that the interim results are something that Air New Zealand staff should be very proud of given the context of a global pandemic that has virtually suspended international air travel.
“I could not be more proud of the way our team has gone about operating our airline in the midst of this crisis. They have dealt with each and every obstacle thrown their way with a huge degree of professionalism and frankly, we wouldn’t be operating the level of domestic and cargo capacity we are without their extraordinary efforts, Mr. Foran said.
“While we made significant changes to our business and cost base, and did this more quickly than most airlines, since the outbreak of the pandemic we have still burnt through over $1 billion in our own cash reserves – that’s just huge. We have been fortunate to receive significant financial assistance from wage subsidies and the Government’s aviation relief package throughout the first half of the financial year, as well as benefiting from lower fuel prices, however, these benefits are not expected to extend into the second half of the financial year.
“From the start of this crisis we have had to make a lot of incredibly tough calls, especially where our people are concerned, and that is never something we would do lightly – but it has all been with the sole purpose of ensuring Air New Zealand’s survival. The fact is, we must remain vigilant and disciplined in our approach to cost management and cash burn while borders remain closed,” Mr. Foran said.
Looking forward, Mr. Foran said that “the airline remains optimistic about the future, and, after making both short and long-term changes to the business to lower the cost base, is well-positioned for recovery when demand returns.
“Although it is clear that Covid-19 will continue to impact the aviation industry for some time to come, we are thrilled to see such strong results from our domestic and cargo businesses. We are one of the few airlines globally that has seen this level of passenger recovery and we know that is driven by our core strength on the domestic market. We know this recovery would not be possible without the continued support of our customers and I want to thank each and every one of you for your support of our airline.
Chairman Dame Therese Walsh noted that while the results from the first half of the 2021 financial year are still significantly subdued, she is optimistic that the changes made to the business over the last year or so have set the airline up well for when borders reopen and the capital raise is complete.
“Since the initial travel restrictions were introduced in early 2020, Air New Zealand has taken significant actions to reduce its cost base. While some of these actions have taken time to implement, we are now seeing the benefits of these efforts flow through into our results. Compared to pre-Covid times, operating costs excluding fuel in the first half of this financial year declined more than 50 percent, and some of these are expected to be sustainable cost reductions moving forward.
“This will be pivotal as we enter recovery mode as it means we will not only be highly cost-effective but with the changes we have made to our fleet, we will also have one of the most modern, efficient fleets in the world.
The airline said that as of February 23, 2021, it has short-term available liquidity of just over $700 million, consisting of cash of approximately $170 million and $550 million of undrawn funds on the Crown facility. The total amount drawn on the Crown facility is $350 million.
Air New Zealand said that having now taken numerous actions to reduce the airline’s cost base, cash burn averaged approximately $79 million per month from September 2020 through January 2021. This compares to an average cash burn of $175 million per month in the fourth quarter of the 2020 financial year.
It estimates an average monthly cash burn for the remaining five months of the financial year to be in the range of $45 million to $55 million while international travel restrictions remain and assuming continued operation of the domestic network with no further lockdowns or social distancing requirements, as well as a continuation of government-supported cargo flights.
Air New Zealand said it is actively engaged with the Crown as the company has continued to assess its longer-term capital structure and funding needs. Air New Zealand has recently reconfirmed to the market and the Crown its intention to complete an equity capital raise before 30 June 2021.