Air New Zealand posted its third straight annual loss but indicated the worst is over and it expects earnings to improve now that borders have reopened.
The Auckland-based airline announced a loss before significant items and tax of NZ$725 million ($450 million) for the year ended June 30 compared with a NZ$444 million loss a year earlier. Operating revenue of NZ$2.7 billion, while up 9%, was significantly impacted by pandemic travel restrictions and dividends remain suspended, it said on Thursday.
With borders now open to the majority of its markets, Air New Zealand expects total flying capacity for the 2023 financial year to be 75-80% of pre-Covid levels, the carrier said. “On this basis, the airline anticipates a significant improvement in financial performance relative to financial year 2022.”
Air New Zealand, just over 50%-owned by the New Zealand government, raised NZ$2.2 billion earlier this year through the issue of new shares to shore up its balance sheet. While travel demand is much stronger than expected as the world seeks to put the pandemic behind it, staff shortages, high fuel prices and tough economic conditions continue to present challenges.
“Given the degree of uncertainty regarding volatility in jet fuel prices, the risk of a global recession, and other macroeconomic factors including inflationary pressures on costs, no earnings guidance will be provided at this time,” Air New Zealand said.
The stock was little changed after the result. It traded at 66.5 New Zealand cents at 11 a.m. in Wellington.
Revive Phase
The airline is now firmly in the “revive” phase of its “survive, revive, thrive” journey, said Chief Executive Officer Greg Foran.
“When travel restrictions began to lift in March the company recorded a very strong recovery in bookings and revenues,” he said. “This trend continues, with high booking levels through July and August.”
The airline is seeing good yield improvement on the bookings it has, which will boost revenue, but also faces volatile fuel costs and it is too early to comment on when it can return to profitability, Chief Financial Officer Richard Thomson said on a conference call.
It is also too soon to say whether the projected resumption of dividend payments in 2026 could be brought forward, he said.
Air New Zealand continues to see domestic leisure travel running ahead of pre-Covid levels and also a recovery in business travel. There has been good demand from incoming international leisure travelers, which augurs well for the approaching summer tourism season, Foran said.
The full-year loss reflected the absence of international travel and the impact of the pandemic on domestic flying, while fuel and other costs surged, he said. The airline also faced expenses re-hiring staff and preparing for the border reopening.
Cargo revenue continued to be a major contributor to the company’s performance, rising 32% to NZ$1 billion, but this is unlikely to be repeated in the current year, the airline said.
Fuel costs rose 80% to NZ$560 million reflecting an almost doubling in prices before hedging, it said.
