By Sofia Marrero airwaysmag.com
Air New Zealand (NZ) has recorded an after-tax loss of US$454m for the 2020 financial year. This is the airline’s first annual loss in 18 years, according to NZ Chairman Dame Therese Walsh.
In the same period in 2019, the airline reported US$276m in profits. In 2020, the pandemic and subsequent travel restrictions floored the carrier’s passenger revenue by 74%.
Speaking on the matter, NZ CEO Greg Foran said 70% of the airline’s revenue is derived from international flying. Thus, the company will continue to be significantly impacted as the pandemic continues.
During April and June, NZ burned cash at an average of US$65m to US$85m per month. At the time, NZ stated that it was looking at all options for its long-term capital structure.
At the beginning of the pandemic, the company received a government-backed loan of US$900m. However, it currently has US$1.1bn in cash reserves due to write-downs in aircraft value and other restructuring costs.
Major Impact in Operations
During June and July, New Zealand relaxed its travel alerts to level 1. Thus, the company experienced heavy demand to operate 70% of its domestic schedule, a level near pre-COVID-19.
Yet, just as other airlines, NZ flight numbers went down by August when the country entered Alert Level 3. Alas, NZ has had to reduce its operative schedule.
The airline had already suspended its 2020 earnings guidance. Now, the carrier says it is not able to provide specific earnings guidance for 2021. This makes sense. No airline can; the uncertainty surrounding travel operations makes it impossible for carriers to predict passenger demand and in turn forecast any formula for maximizing revenue.
There is, however, one forecast that can be surmised. Following the negative prospect ahead, NZ states that each of the modeled scenarios suggests that it will make a loss in 2021.