Air New Zealand braces for big loss, more changes coming

Air NZ has confirmed it expects to report an underlying loss for the 2020 financial year while estimating hedging losses and aircraft impairments of up to $560m. The airline, which said Tuesday it has yet to draw on the Government's $900m loan, says while the recent move to Alert Level 2 allowed it to get its domestic engine turning again, it is clear that it will take some time for demand to return to pre-Covid levels. "We are preparing for a scenario in which the airline is still 30 per cent smaller than pre-Covid levels in two years' time" says CFO Jeff McDowall. For the second half of the 2020 financial year, Air NZ's network capacity is expected to be approximately 50% lower than the prior comparative period, driven by a reduction of approximately 90% in Q4. In light of this and the fact there was very little revenue coming in during Alert Levels 3 and 4, the airline is now expecting to report an underlying loss for the 2020 financial year. It currently has $640m of short-term liquidity, versus $1b prior to the outbreak. That doesn't include any of the $900m Government loan facility. "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 right-size the business to reflect the expectation that, for some time, our airline will be smaller than it was pre Covid-19," says McDowall.<br/>