Air New Zealand has posted a half-yearly loss of US$137.2 million before tax and other significant items on Thursday. In a note to the New Zealand Stock Exchange, the airline attributed the loss to the impact of COVID-19 on the airline and the broader aviation industry. Despite the loss, Air New Zealand CEO Greg Foran said people should be proud of the result. “Together, we’ve kept Kiwis connected to each other,” he said.
Strong domestic and cargo business bolsters Air New Zealand
International passenger services remain in the doldrums at Air New Zealand. But domestic capacity is at 76% of pre-COVID levels and cargo revenue is up 91%.
“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,” said Mr Foran today.
“For the six months to 31 December 2020, we operated 1,800 flights, moving four million passengers around the country and saw strong signs of corporate demand recovery as the economy started to ramp up following the second lockdown in August 2020.”
Citing ongoing issues with international passenger services, Air New Zealand’s operating revenue was down 59% to US$890 million in the six months to December 31, 2020. The average monthly cash burn between September and December 2020 was US$58.6 million. The airline expects this to drop over the coming months.
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Tough calls and good management help Air New Zealand get through the crisis
Air New Zealand has short-term liquidity of around US$520 million. Of this, $126 million is cash and the remainder is an undrawn government loan facility. Steps to recapitalize the airline’s balance sheet are underway. That should be completed by June 30.
“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 (NZ) $1 billion in our own cash reserves,” Air New Zealand’s CEO said.
“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.”
In a presentation following the release of the results, Greg Foran and his team struck an upbeat tone. Mr Foran said, compared to most of Air New Zealand’s global peers, the kiwi airline was in a “fortunate position.” During the presentation, it was noted the airline was cash flow positive in the last quarter of 2020.
Fortunate or not, citing the large degree of travel uncertainty and border restrictions this year, the airline’s executive team declined to provide any earnings guidance for financial year 2020/21 today. However, they did flag a substantial loss for the full year. Those numbers will come out later in 2021.
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