Air New Zealand aims to reduce cash burn

Air New Zealand said the impact of the Covid-19 pandemic has seen it spend around NZ$1bn ($744mn) out of its cash reserves since travel restrictions tightened in March 2020. It expects the rate of excess spending to income to fall in the second half of the 2020-21 fiscal year to 30 June as domestic travel edges back to pre-Covid levels.

The airline forecasts the average monthly cash burn will fall to between NZ$45mn-55mn in the second half of 2020-21 compared with an average burn rate of NZ$69mn during October-December and NZ$122mn for July-September.

"As there is still a large degree of uncertainty surrounding the lifting of travel restrictions and the subsequent level of demand, Air New Zealand is not providing 2021 earnings guidance at this time. Despite strong domestic and cargo performance, the scenarios we are currently modelling suggest we will make a significant loss in 2021," said Air New Zealand chief executive Greg Foran.

It reported a loss of NZ$72mn in the first half of 2020-21 against profit of NZ$101mn in the same period in 2019-20. Fuel costs dropped to NZ$152mn during July-December 2020 from NZ$656mn for the same period a year earlier with the reduced flying activity. Lower fuel consumption accounted for NZ$445mn of the drop in fuel costs, the airline said.

"Since the outbreak of the pandemic we have still burnt through over NZ$1bn in our own cash reserves. We have been fortunate to receive significant financial assistance from wage subsidies and the government's aviation relief package throughout the first half of the financial year, as well as benefiting from lower fuel prices. However these benefits are not expected to extend into the second half of the financial year," Foran said.

"Although it is clear that Covid-19 will continue to impact the aviation industry for some time to come, we are thrilled to see such strong results from our domestic and cargo businesses. We are one of the few airlines globally that has seen this level of passenger recovery and we know that is driven by our core strength on the domestic market," Foran said.

New Zealand's domestic air travel market has recovered to around 80pc of its pre-Covid levels. China's domestic air travel has recovered to 98pc, Japan 76pc, Australia 50pc, the US 58pc and the UK 16pc, Air New Zealand said.

Air New Zealand's domestic market share has increased from 82pc pre-Covid to 85pc because the exit from rivals from regional New Zealand markets over the lockdown period.

The airline plans to invest NZ$1.7bn in new aircraft and associated assets through to 2024.

By Kevin Morrison