Air New Zealand flags loss expectation for year
has not yet tapped into any funds from the Government but confirmed it expects to report a loss this year, despite massive costcutting measures.
The national carrier moved swiftly to obtain a loan facility of up to $900 million from the Government as soon as international travel restrictions were announced.
It currently has $640 million of shortterm liquidity, versus $1 billion prior to the outbreak. That does not include any of the $900 million.
‘‘We have not yet needed to draw down on the Government loan facility, as we continue to utilise all available levers to reduce our cash burn and rightsize the business to reflect the expectation that, for some time, our airline will be smaller than it was preCovid19’’ chief financial officer Jeff McDowall said.
The airline had no financial covenants on new or existing debt facilities and no significant debt maturities until 2022, it said.
Measures taken to minimise cash burn include slashing 4000 jobs or 30% of the workforce, which was expected to drive annualised savings of $350 million to
$400 million.
It had deferred or cancelled almost $700 million in expected capital expenditure to December 2022, including deferrals of planned A321 NEO deliveries.
The combination of these and other measures mean it expected to reduce its average monthly cash outflows by approximately $50 million to $60 million for the 2020 financial year.
‘‘We will continue to seek out further opportunities to consolidate facilities, reduce capital spend, review fleet composition, supply chain costs and adjust our labour base further,’’ he said.
He said ‘‘We know that demand for air travel will eventually rebound, so we are cognisant of striking the right balance between removing cost from the business and ensuring the airline is in a strong position to ramp up as demand recovers.’’
For the second half of the 2020 financial year, its network capacity is expected to be about 50% lower than the prior comparative period, driven by a reduction of approximately 90% in the fourth quarter, it said.
The loss will include hedge unwinding costs of $85 million to $105 million, a $350 million to $450 million noncash aircraftimpairment charge, and $140 million to
$160 million in reorganisation costs.
Regarding its earnings outlook, Mr McDowall said the move to Alert Level 2 had been a welcome reprieve, ‘‘allowing us to get the domestic engines turning again.’’
He reiterated, however, ‘‘we are preparing for a scenario in which the airline is still 30% smaller than preCovid levels in two years’ time.’’ — BusinessDesk