Air New Zealand has today announced its 2020 financial results, affirming the devastating effect of COVID-19 on its business and the global aviation industry following extensive travel and border restrictions.
Air New Zealand has reported a loss before other significant items and taxation of NZ$80 million* for the 2020 financial year, compared to earnings of NZ$355 million in the prior year.
Despite reporting a strong interim profit of NZ$173 million** for the first six months of the financial year, and seeing positive demand on North American and regional routes early in the second half, COVID-related travel restrictions resulted in a 74 percent drop in passenger revenue from April to the end of June compared to the prior year, which drove the airline’s operating losses.
Despite the hurdles the aviation industry has faced, the airline says they have responded to this crisis with urgency, whilst ensuring that the business remains well positioned to grow profitably when travel restrictions are eventually removed and customer demand returns.
“I am in awe of the dedication, perseverance, and professionalism of Air New Zealanders across the business and never cease to be amazed at the resilience and strength of our people as we work our way through this crisis.”
Greg Foran, Chief Executive Officer
The important figures
- Operating revenue of $4.4 billion, down 16 percent on the prior year as a result of travel restrictions due to the global pandemic
- Total network capacity decline of 21 percent compared to the prior year
- Cargo revenue of $412 million, up 15 percent on the prior year
- Loss before other significant items and taxation of ($80) million
- Loss before taxation of ($576) million
- Board has determined not to declare a final dividend for the 2020 financial year, given current financial pressures
- Short-term liquidity of $1 billion at close of business 25 August 2020, (including funds available under the Government standby loan facility which has not yet been utilised)
Quick and decisive action
Air New Zealand’s Chairman Dame Therese Walsh says she is proud of the way the business has responded to this crisis, acting with speed and agility to lower the cost base, and pivoting quickly to ramp up domestic and cargo services to help keep the New Zealand economy moving.
In preparation for the eventual recovery of demand, the Board has recently endorsed a refresh of the airline’s strategy which is focused on sustaining competitive strengths and ensuring long-term positive outcomes for customers, staff, the broader community, and shareholders.
Chief Executive Officer Greg Foran will provide more context at the airline’s Annual Shareholders’ Meeting on 29 September, which will include a discussion of the airline’s network focus, enhancements to its AirpointsTM loyalty programme, sustainability focus and digital priorities.
“It has been great to see our domestic business perform well ahead of our expectations in June and July as the New Zealand public once again shows us that they have an innate love of travel.”
Greg Foran, Chief Executive Officer
“We are also pleased to have ramped up our cargo offering in recent months, flying more than 50 flights per week under the International Airfreight agreement we signed with the Ministry of Transport in late April. These cargo services ensure key goods such as medical supplies and food continue to flow in and out of New Zealand.”
“However, we have to bear in mind that with almost 70 percent of our revenue derived from international flying, while border restrictions remain in place our business will continue to be significantly impacted. The recent resurgence of community transmission in New Zealand in August has also reminded us that we cannot afford to be complacent.”
“In the airline’s 80-year history we have faced many challenges and emerged from each one stronger than before. We entered this crisis in an enviable position, and with our core Domestic network, I believe we are better positioned for recovery than many of our airline peers.
“But given the restructuring and consolidation we had started to see within the global aviation industry, we need to be hyper-vigilant and protect our core competitive advantages. It is clear that COVID-19 is unlike any other crisis the aviation industry has experienced and we will need to be more nimble than ever as borders reopen” Mr Foran continued.
Outlook for 2021
Given the uncertainty surrounding travel restrictions and the level of demand as these restrictions lift, Air New Zealand says they are currently not able to provide specific 2021 earnings guidance.
However, each of the scenarios the airline is currently modelling suggests the loss will continue into 2021.
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* Earnings before other significant items and taxation represent Earnings stated in compliance with NZ IFRS (Statutory Earnings) after excluding items which due to their size or nature warrant separate disclosure to assist with understanding the underlying financial performance of the Group. Earnings before other significant items and taxation is reported within the Group’s audited annual financial statements.
** Represents Earnings before other significant items and taxation.