(TAN): Air New Zealand has reported a loss before other significant items and taxation of NZD 87 million (USD 57.6 million) for the 2020 financial year, compared to a profit of NZD 387 million in the previous year. The airline said this was its first loss in 18 years.
Despite reporting a strong interim profit of NDZ 198 million for the first six months of the financial year, and seeing positive demand on North American and regional routes early in the second half, Covid-related travel restrictions resulted in a 74% drop in passenger revenue from April to the end of June compared to the prior year, which drove the airline’s operating losses.
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Statutory losses before taxation, which include NZD 541 million of other significant items, were NZD 628 million, compared to earnings of NZD 382 million last year. Non-cash items of NZD 453 million reflected most of the other significant items, including the NZD 338 million aircraft impairment charge related to grounding of the Boeing 777-200ER fleet for the foreseeable future.
The airline has responded to this crisis with urgency, including securing additional liquidity, structurally reducing its cost base and deferring significant capex spend, whilst ensuring that the business remains well positioned to grow profitably when travel restrictions are eventually removed and customer demand returns.
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Air New Zealand’s Chairman Dame Therese Walsh said, “The 2020 financial year has been a year of stark contrast. Air New Zealand had a solid start to the year and was focused on driving profitable growth into the second half. We were also preparing to launch the first ever non-stop link between New Zealand and New York.”
“Now, nearly six months following the declaration of a global pandemic, the NZD 87 million loss we are reporting… our first loss in 18 years, reflects the quick and severe impact Covid-19 has had on our business,” she said.
The airline’s board is focused on preserving Air New Zealand’s liquidity across a range of potential demand recovery scenarios. Given current financial pressures as the airline manages the impact of COVID-19, the board has decided to not declare a final dividend for the 2020 financial year.
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Air New Zealand CEO Greg Foran said, “In the airline’s 80-year history we have faced many challenges and emerged from each one stronger than before. We entered this crisis in an enviable position, and with our core domestic network, I believe we are better positioned for recovery than many of our airline peers. But given the restructuring and consolidation we had started to see within the global aviation industry, we need to be hyper vigilant and protect our core competitive advantages. It is clear that Covid-19 is unlike any other crisis the aviation industry has experienced and we will need to be more nimble than ever as borders reopen.”
Given the uncertainty surrounding travel restrictions and the level of demand as these restrictions lift, Air New Zealand did not provide specific 2021 earnings guidance. “However, each of the scenarios we are currently modelling suggest we will make a loss in 2021,” Foran said.
