Air New Zealand expects a gradual recovery in air travel volumes from the Covid-19 pandemic and does not see any restoration of long-haul flights to North America in the 2020-21 fiscal year to 30 June but hopes there will be some regional flights to the Pacific islands and Australia in the year ahead.
The comments on the outlook for air travel accompanied Air New Zealand's 2019-20 financial results, which showed a net loss of NZ$454mn ($301mn) for the airline compared with a net profit of NZ$276mn in 2018-19. This reflected one-off losses of NZ$541mn in 2019-20, prompted by a dramatic slowdown in air travel this year as governments around the world imposed travel restrictions to combat the Covid-19 outbreak.
"Nobody knows exactly what shape the recovery in air travel will take. We do not think it will be a V-shaped recovery, but probably a gradual recovery that will have a long tail," Air New Zealand chief executive officer Greg Foran said after the airline released its 2019-20 financial results. The airline is not anticipating a return of passenger demand to 2019 levels until 2023 or beyond, Air New Zealand said. This is consistent with the view of the International Aviation Transport Association.
"Although significant uncertainty remains, we are currently expecting in the short term to be a largely domestic airline, with cargo and some flying to the Tasman and Pacific islands," Foran said.
Despite reporting a strong 2019-20 first-half profit of NZ$198mn and seeing positive demand on North American and regional routes early in the second half, Covid-19-related travel restrictions resulted in a 74pc drop in passenger revenue from April to the end of June compared with the prior year, which drove the airline's operating losses, Foran said.
Around 70pc of the airline's revenue was from its international operations prior to the Covid-19 pandemic, but air travel will continue to be significantly impacted if border restrictions remain in place, he said.
The decline in flights and jet fuel prices in 2019-20 compared with the previous year led to a fall in jet fuel costs to NZ$1.02bn from NZ$1.27bn in 2018-19, Air New Zealand said. The airline has 1.73mn bl of jet fuel hedged for the first half of 2020-21 and 870,000 bl hedged for the second half of 2020-21, it said.
New Zealand's air travel volumes in July were around 70pc of pre-Covid-19 levels and compared favourably with other countries because of low infection rates compared with the rest of the world, Air New Zealand said. Domestic air travel volumes were 55pc of pre-Covid-19 levels in the US; France 55pc; Germany 25pc; the UK 20pc; Australia 10pc; but below China's 95pc, the airline said.
"Air New Zealand is currently not able to provide specific 2021 earnings guidance. But each of the scenarios we are currently modelling suggest we will make a loss in 2021," the airline said.
| Air New Zealand's 2019-20 financial results (NZ$mn) | ||
| 2019-20 | 2018-19 | |
| Passengers carried ('000) | 13,525 | 17,738 |
| Operating revenue | 4,836 | 5,785 |
| Cargo revenue | 449 | 390 |
| Fuel costs | 1,022 | 1,271 |
| Net loss/profit | -628 | 382 |
| Source: Air New Zealand | ||
