26 May 2020

Air NZ forecasts loss after little revenue during lockdown

10:59 am on 26 May 2020

Air New Zealand is set to make a significant loss because of the Covid-19 pandemic, but has more than $1.5 billion in cash and reserves.

Air New Zealand plane.

Photo: 123RF

The airline said in a statement to the stock exchange it had had little revenue over the past six weeks under the level 4 and 3 lockdowns, which forced it to cut capacity by 95 percent.

It made no precise forecast of the size of the loss. Last year its profit before tax and interest was $374 million.

"We have not yet needed to draw down on the government loan facility, as we continue to utilise all available levers to reduce our cash burn and right-size the business to reflect the expectation that, for some time, our airline will be smaller than it was pre Covid-19," chief financial officer Jeff McDowall said.

He said the airline had $640m in short term funds, which along with the $900m government loan, meant it was well financed.

Since the pandemic hit the global tourism and travel market the airline has moved to cut its workforce. It is in the process of making about a third, or 4000, jobs redundant and already announced significant losses of cabin crew, pilots, engineers, and ground staff.

It has also delayed the purchase of new planes, grounded a significant part of its long haul fleet, cut pay for senior staff, and reduced all non-essential spending.

McDowall said even with the pick up in domestic travel under level 2 conditions, it was expecting to have about half the capacity of a year ago.

"We are preparing for a scenario in which the airline is still 30 percent smaller than pre-Covid levels in two years' time."

"The airline is now expecting to report an underlying loss for the 2020 financial year," he said.

The carrier is expecting one off costs of between $554m and $694m for the current year ended June, which includes redundancy and restructuring costs, write down in the value of aircraft, and losses on fuel hedges.

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