Air New Zealand sees annual underlying loss due to coronavirus

Air New Zealand Ltd said on Tuesday it would report an underlying loss in the financial year ending June 30 due to the coronavirus pandemic, but had slashed costs to the extent it had not yet needed to draw down on a government loan.

The airline has cut 30% of its staff, or 4,000 employees, and will ground its fleet of 16 Boeing Co 777 widebody planes until at least the end of December as it prepares for a sustained fall in travel demand.

“We are preparing for a scenario in which the airline is still 30% smaller than pre-COVID levels in two years’ time,” Chief Financial Officer Jeff McDowall said in a statement.

It will reduce its monthly cash outflows for the financial year ending June 30, 2021, by NZ$50 million to NZ$60 million, the company said.

Air New Zealand said it had short-term liquidity of NZ$640 million ($390.34 million) as of May 25 and had not drawn on a NZ$900 million government loan that carries interest rates ranging from 7% to 9% a year.

If drawn, the government has the ability to seek repayment through a capital raising by the airline after six months, or converting the loan to equity.

Due to a fall in demand and travel restrictions, Air New Zealand expects a 50% capacity drop in the six months ending June 30, leading to a sharp fall in revenue.

The airline said it would defer or cancel almost NZ$700 million in expected capital spending to December 2022, including deferrals of planned Airbus SE A321neo deliveries.

Air New Zealand also expects to record a non-cash impairment charge of between NZ$350 million to NZ$450 million in relation to its Boeing 777 aircraft. ($1 = 1.6396 New Zealand dollars) (Reporting by Jamie Freed in Sydney and Shreya Mariam Job in Bengaluru Editing by Sonya Hepinstall)