Air New Zealand sees back-to-back losses as crisis persists

Air New Zealand reported its first full-year loss in 18 years and said it is unlikely to return to profit soon as the coronavirus pandemic cripples international travel.

The carrier posted a net loss after tax of NZ$454 million ($300 million) for the year ended June 30, down from a NZ$276 million profit a year earlier. While unable to provide specific earnings guidance, it said current modeling suggests it will make another “significant” loss in 2021. The Auckland-based airline, which traditionally generates two thirds of its revenue from international travel, doesn’t expect passenger demand to return to 2019 levels until 2023 or beyond.

“Until global borders reopen, we will continue to be significantly impacted by this crisis,” Chief Executive Officer Greg Foran said. “The unfortunate reality is that we don’t expect to see a return to long-haul travel for some time and until then we will be a keenly focused domestic airline.”

Airlines around the world are reeling from the impact of the pandemic on global travel, forcing them to review fleets, routes and spending and turn to governments for help. Air New Zealand has laid off about 4,000 staff and grounded some aircraft, while domestic services have been hampered by a second lockdown in largest city Auckland after a new Covid-19 outbreak there.

“Some airlines will not survive this,” Foran said. “The actions we have taken to date, albeit painful, are with a view to setting ourselves up for success in whatever competitive and demand environment emerges on the other side of this crisis.”

Air New Zealand shares were steady at NZ$1.415 at 11:10 a.m. in Wellington. The stock has slumped 52% this year and was as low as 80 NZ cents in late March.

On a conference call with analysts, Foran described the operating environment as the worst the aviation industry has ever experienced and said the road to recovery looked long. “We absolutely aren’t seeing a V-shaped recovery or even a U, it’s more like an L,” he said.

Operating revenue sank 16% to NZ$4.84 billion as total network capacity declined 21% from a year earlier. Cargo revenue was a bright spot, rising 15% to NZ$449 million.

Air New Zealand said it expects to start drawing on a NZ$900 million loan facility provided by the government, which is a 52% shareholder, in coming days.

“The airline continues to assess its capital structure and the longer term options available,” it said. “The government has recently reaffirmed its commitment to maintaining its majority shareholding, and the board is engaging constructively with the Crown in its capital structure and funding discussions.”