Air NZ is upbeat despite a statutory loss before taxation of NZ$810 million for the FY22 year.
The airline’s loss before other significant items and taxation was NZ$725 million which is consistent with guidance provided to the market in June.
Although the financial year ended strongly following the phased reopening of New Zealand’s borders in March, the airline’s operating revenue of NZ$2.7 billion was significantly impacted by pandemic-related travel restrictions.
Cargo and domestic revenues helped lift overall revenue by 9 per cent, however, high fuel prices and reduced flying over much of the year resulted in a loss for the period.
Air New Zealand Chief Executive Officer Greg Foran said the airline continued to be guided by a clear strategy, moving deftly to address continued change by focusing on doing the right thing for its stakeholders.
“For customers, we’ve been focused on restoring services, maintaining a choice of fares and launching innovations to improve their journey with us. For our amazing staff we have provided one-off awards to acknowledge their continued extra mahi, and for our communities, we’ve been obsessed with operational performance, which drives the reliable services they depend on,” Mr Foran said.
“For our shareholders, whose support has refuelled the business for future growth, we’ve completed a successful recapitalisation that was structured to be fair to our shareholders, including those that didn’t take up the rights offer.”
Mr Foran said cargo revenue continued to be a major contributor to the company’s performance, up 32 per cent to NZ$1 billion. Additional flying under the New Zealand and Australian government airfreight schemes contributed NZ$403 million of that revenue.
Firmly in the ‘revive’ phase of the ‘survive, revive, thrive’ journey, Mr Foran says the current environment is one of strong bookings despite ongoing challenges.
When travel restrictions began to lift in March the company recorded a very strong recovery in bookings and revenues. This trend continues, with high booking levels through July and August. Corporate bookings are also encouraging and are trending closely towards pre-Covid levels.
Mr Foran referred to the airline’s mid-August schedule changes, which reduced seats by 1.5 per cent through to the end of March 2023, as another example of doing the right thing for stakeholders.
“As we’ve been seeing overseas, travel demand is much stronger than anyone anticipated. But we’re operating in a very tight labour market with high fuel prices, tough economic conditions and the highest levels of employee sickness in more than a decade.
“Our rehiring efforts and training capability have been excellent, as has work to get our Boeing 777-300ER aircraft back flying again, but the experience for some of our customers and the impact on our front-line staff this winter has been unacceptable, so we’ve adapted yet again.
“Having adjusted our schedule to provide customers with increased surety over their travel plans for the coming spring and summer, I am hugely appreciative of the work the Air New Zealand whānau has done to deliver more than 25,000 flights across June and July alone.”
Air New Zealand Chair Dame Therese Walsh thanked Greg and the Air New Zealand team for a year in which the airline not only managed significant challenges but also introduced changes that will deliver improved services to customers and made progress on their long-term sustainability goals.
“The airline’s continued ability to step carefully through an ongoing pandemic while looking beyond the horizon is becoming a core capability. While introducing and then removing vaccination requirements for domestic travel, there have been preparations for our New York launch and the completion of designs for our new Boeing 787 Dreamliner cabin experience.
“In April we announced ‘Flight NZ0’, a programme to engage customers as we work towards net zero carbon emissions by 2050. We were the second airline globally to announce an interim science-based target to 2030 and continue to make progress on sustainable aviation fuel and zero emissions aircraft technology.
“Throughout the year we have also made improvements to the pay and conditions for our people, settling 12 collective employment agreements, increasing the base pay of our front-line workers and restarting incentive payments to staff on individual employment agreements ensure we retain our dedicated team.”
Dame Therese acknowledged the support the airline has received from its shareholders over the course of a challenging two-year period.
“From the Crown loan provided in the early days of the pandemic, to the airfreight support scheme that helped us keep connected to key export markets, to the NZ$2.2 billion recapitalisation completed in May which allowed thousands of shareholders to take part in refuelling the airline for success. We have had significant support from all our shareholders and for that, we are truly grateful.”
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Strong liquidity position with dividend suspended
As at 23 August 2022, the airline has available liquidity of NZ$2.3 billion, consisting of approximately NZ$1.9 billion in cash and NZ$400 million of available funds on the unsecured standby loan facility with the Crown. The cash balance includes NZ$200 million of issued redeemable shares which the airline intends to redeem once our recovery is further progressed.
The Board does not expect to consider payment of dividends before the airline’s earnings substantially recover and in the context of a supportive and sustained broader economic environment and recovery.
Outlook for 2023
With borders now open to the majority of the airline’s markets, Air New Zealand expects the 2023 financial year to represent the first full year of uninterrupted passenger flying since the beginning of the pandemic.
Total flying capacity for the 2023 financial year is expected to be in the range of 75 per cent to 80 per cent of pre-Covid levels. On this basis, the airline anticipates a significant improvement in financial performance relative to the financial year 2022.
Given the degree of uncertainty regarding volatility in jet fuel prices, the risk of a global recession, and other macroeconomic factors including inflationary pressures on costs, no earnings guidance will be provided.
