People's appetite for travel is breathing life back into Air New Zealand, writes Anan Zaki. File photo Photo: AFP
Analysis - As the walls of Covid-19 closed in on the global aviation sector in 2020, Air New Zealand prepared itself for turbulence.
But no one could have predicted just how severe that turbulence would be.
Over the three years that followed, the losses kept mounting and the job cuts were in the thousands.
In 2020, it reported a full-year loss of $454 million. In 2021, its loss was $289m and in 2022, it was $591m.
The government stepped in early 2020 by providing up to $900m in loans, warning New Zealand was at risk of not having a national carrier without the intervention.
Fast forward three years, with a successful equity raise and the long-awaited reopening of the borders, the airline is finally back in the black.
It has reported a strong return to profitability, with profit after tax for the six months ended December at $213m, and underlying profit at just under $300m.
The airline is enjoying strong demand while still rebuilding its capacity, and navigating through the challenges of sky-high fuel costs and staff shortages.
The capacity constraints that came at a time of strong demand has benefited the airline hugely.
It said fuel costs for the first half were $754m, and that figure was forecast to double for the full year.
High fuel prices can be a killer for airlines, but people's appetite for travel is breathing life back into Air New Zealand.
"Very strong yields and high load factors more than offset a heavy fuel burden given higher oil prices in the period," Forsyth Barr head of research Andy Bowley commented.
Passenger revenue per available seat kilometre (RASK) - a key metric when assessing the airline's performance - was strong.
Domestic RASK was up 28 percent compared to the first half of 2019. Trans-Tasman/Pacific Islands up 47 percent and long haul up 50 percent.
Current domestic bookings were at 95 percent of pre-Covid levels, while international bookings were at 75 percent.
These were encouraging signs despite the pressures faced by the industry.
Meanwhile, staff shortages and sickness continue to cause disruption, despite the 2000 staff the airline recruited in the first half alone (its biggest ever recruitment drive).
But despite the recovery story, the company has faced strong public criticism over its customer service and high fares.
"We know we have more work to do to tackle customer concerns like long wait times at our call centres, getting planes to depart and arrive on time, lost baggage and getting refunds back in a timely manner," Air New Zealand chief executive Greg Foran said after today's result.
"We're very aware that flying is not currently the pain-free experience it should be and getting back into shape is a key priority," he said.
But despite those challenges, Air New Zealand remained optimistic about demand for the remainder of the financial year, forecasting underlying profit to be in the range of $450m and $530m.
In a sign of the stronger than expected rebound, the company board said it would consider paying dividends earlier than its previous forecast of the 2026 financial year.
