Air New Zealand has reported an after tax loss of $289 million for the year to June 30, its first full year result operating in a Covid-19 environment.
In 2020 the national carrier posted a $454m loss, its first annual loss in 18 years.
To help it weather the pandemic Air New Zealand has drawn down $350m of a $1.5 billion loan from the Government, which owns 52 per cent of the airline. It expects to draw down further in the coming months.
Earlier this month the company said it had, in consultation with the Crown, decided to defer a planned capital raise until the first available window in the first quarter of 2022 given the instability of the operating environment.
On completion of the recapitalisation, Air New Zealand expected to repay all amounts drawn under the loan and the Crown shared that expectation, it said.
In the 2021 financial year Air New Zealand benefited from about $450m of government assistance including airfreight support schemes.
Border restrictions resulted in revenue falling 48 per cent to $2.5 billion and capacity fell 55 per cent on the prior year.
Cargo revenue increased 71 per cent to $769m.
Last year the airline sent its seven Boeing 777-300ER aircraft and, its eight 777-200ER fleets into deep storage at overseas desert facilities.
The older Boeing 777-200ER fleet as well as one leased Boeing 777-300ER aircraft were not expected to return to service, the airline’s financial statements said. Four 777-200ER aircraft were up for sale and all Boeing 777-200ER aircraft are expected to be disposed within the next year.
Domestic capacity rebounded strongly as the year progressed, reaching 93 per cent of pre-Covid for the three months ending July, driven by strong leisure demand and the return of corporate customers.
The nationwide lockdown as a result of the Covid-19 Delta outbreak in Auckland was expected to negatively impact its financial performance.
Air New Zealand chairman Dame Therese Walsh said the result reflected the fact that the airline was unable to fly two-thirds of its passenger network.
“In a severely constrained environment, Air New Zealand maintained cost discipline, focusing on delivering with excellence in the areas in its control,” Walsh said.
Air New Zealand chief executive Greg Foran said the return of long-haul travel seemed some time away.
The airline had “reimagined” its domestic business, increasing the choice of flight times and introducing greater price differentiation for peak and off-peak flying, Foran said.
“This allows us to offer more lower priced fares, which will unlock new demand for domestic tourism,” Foran said.
The 2021 financial result was in line with guidance.
Foran said the airline had expected to be doing more passenger flying and less cargo, but the reverse had happened
“We ended up where we expected but we got there through different methods.”
The Government’s International Airfreight Capacity subsidy scheme remained open until October, but Air New Zealand expected it would be extended as had happened several times in the past.
“I think it will be as long as the borders remain closed.”
Currently, the airline is flying a skeleton operation on its domestic network, and is not servicing the regions as a result of the alert level 4 lockdown.
“Four is a pretty skinny schedule.”
If the country ended up at different alert levels the airline would respond accordingly, he said.
“We pivot according to what those levels adjust to. We start building a schedule around that.”
He said planes needed to be “kept in a warm state” which meant schedules were almost being adjusted in real time whenever there was an announcement of an alert level change.
It was hard to know when trans-Tasman travel would resume, and when it did, it would probably operate like many other international ports, and not as a bubble, Foran said.
Since standing down more than 4000 staff in 2020 in response to the pandemic Air New Zealand had brought back 700 staff, he said.
It was too difficult to say whether there would be future job losses as a result of the Tasman going offline and New Zealand’s lockdown.
“If it’s not going to be with us for too long then we just weather the storm.”
However, if New Zealand’s outbreak lasted a few months, then cost saving opportunities would be considered, he said.
“We’ll just see what transpires.”
Getting the airline started up again was more difficult than shutting it down, he said.
He hoped by early next year vaccination rates would be at a level where international travel could start to return and by 2023 people would be able to start holidaying again.
“People do want to travel. We saw that as soon as we were able to get the Tasman open. We saw it with Rarotonga.”
And he had seen it with Air New Zealand’s its domestic business, he said.
“July was the busiest July we’ve ever had.”
As part of the response to Covid-19 Foran reduced his annual contracted salary by $250,000.
For his first full financial year in the role Foran earned $1.46m and received just over 1 million performance rights in September as part of a long term incentive plan.
Before joining the national carrier in February last year Foran was Walmart’s US boss earning US$13 million (NZ$18.6m) a year at the retail giant.
Dividends remained suspended and, given uncertainty surrounding the current lockdown, ongoing international travel restrictions and uncertainty regarding future travel demand, Air New Zealand had suspended 2022 earnings guidance.
For the year Air New Zealand made $143m of foreign exchange gains on uncovered debt and gained $21m relating to the sale of its Heathrow landing slots.
These were partially offset by aircraft impairment and lease modification costs of $78m, reorganisation costs of $39m and de-designation of hedges as a result of forecast transactions no longer expected to occur of $18m.
Air New Zealand shares closed at $1.53 on Wednesday. They were trading down 1 cent on Thursday morning.