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27 August, 2020

Air New Zealand swings to $416m loss, but domestic green shoots emerge

A pair of Air New Zealand jets being serviced on the tarmac at Queenstown Airport (ZQN).

By Travel Weekly

Air New Zealand has suffered its first full-year loss in 18 years, reflecting the severe impact of COVID-19 on the airline.

New Zealand’s flag carrier posted a NZ$454 million ($416 million) loss in FY20 – a fair swing away from the NZ$276 million ($255 million) profit it enjoyed a year earlier.

The loss included a NZ$338 million ($310 million) aircraft impairment charge related to grounding of Air New Zealand’s Boeing 777-200ER fleet “for the foreseeable future”.

The airline’s operating revenue fell by 16 per cent to NZ$4.8 billion ($4.4 billion) as a result of travel restrictions due to COVID-19, while total network capacity dropped by 21 per cent.

Air New Zealand CEO Gre Foran acknowledged the last few months as a “particularly trying time” for customers with the mass cancellation of flights and continuing uncertainty regarding international travel.

“I would like to apologise sincerely for the fact that we didn’t live up to customers’ expectations in the way we handled the processing of customer credits,” he said.

“I would also like to thank our customers for their ongoing support and patience.”

Last month, Air New Zealand rolled out the initial stages of a digital tool for customers to view and redeem their credits online.

To date, more than 70,000 customers have utilised the tool to redeem existing credits into new bookings.

In positive news, the airline experienced heavy demand for domestic travel in June and July, particularly into leisure destinations such as Queenstown, and was operating around 70 per cent of its pre-COVID domestic network.

“It has been great to see our domestic business perform well ahead of our expectations in June and July, as the New Zealand public once again shows us that they have an innate love of travel,” Foran said.

“We are also pleased to have ramped up our cargo offering in recent months, flying more than 50 flights per week under the International Airfreight agreement we signed with the Ministry of Transport in late April.

“These cargo services ensure key goods such as medical supplies and food continue to flow in and out of New Zealand.

“However, we have to bear in mind that with almost 70 per cent of our revenue derived from international flying, while border restrictions remain in place our business will continue to be significantly impacted.”

Foran said the recent resurgence of community transmission of COVID-19 in New Zealand in August has also reminded the airline that it cannot afford to be complacent.

“In the airline’s 80-year history, we have faced many challenges and emerged from each one stronger than before,” he said.

“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.”

Air New Zealand is estimating an average monthly cash burn rate of NZ$65 million ($60 million) to NZ$85 million ($78 million) going forward while international travel restrictions remain, and assuming the resumption of domestic travel with no social distancing requirements, as well as a continuation of government-supported cargo flights.

Featured image source: iStock/Goddard_Photography

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