Air New Zealand says the strong domestic air travel market as well as its busy cargo business have played a significant factor in mitigating the negative impacts of COVID-19.
In a trading update and earnings commentary provided to the NZX for the 2022 financial year, the airline said demand for Tasman services is "building".
Air NZ expects losses before other significant items and taxation will not exceed $450 million for the 2021 financial year.
Last year that loss was $87 million, while in 2019 the airline made a profit of $387 million.
From survival to revival
- Domestic capacity is now at approximately 90 percent of pre-Covid levels
- The Tasman market's capacity is currently around 70 percent of pre-Covid levels
- Cook Islands are seeing demand levels exceed those of pre-Covid
- Staff are going to be rewarded with with $1,000 worth of Air New Zealand shares
- The airline has drawn down $350 million of its $1.5 billion loan facility from the government
Despite the domestic market performing strongly and bookings on Australia and Cook Islands routes continuing to build, a large degree of uncertainty remains.
"The airline is not expecting any meaningful recovery in long-haul demand in the 2022 financial year, notwithstanding the roll out of global vaccination programmes and the potential for long-haul borders to begin reopening progressively in the second half of the financial year," the report said.
It adds that the company's financial results last year "benefitted from a number of tailwinds received through various government support and other mechanisms totalling approximately $300 million, which will not continue at the same level in the 2022 financial year".
Air NZ said the efforts its staff made during one of the airline's toughest years will be recognised with an award of $1000 worth of company shares to all permanent employees.
"This is the right thing to do given the mahi and sacrifices Air New Zealanders have made to get the airline through survive and into its revive phase... we want them to have the chance to benefit from the future success we will really need their help to deliver," CEO Greg Foran said.
"I'm immensely proud of the way our people have responded to the COVID-19 crisis. They have risen to the occasion, working hard to keep New Zealand connected and Kiwis safe."
Around 8000 employees will be eligible for the share award, which will be made in the last quarter of this calendar year.
In addition, after 15 months of reduced salaries, the airline will end employee salary reductions from July 1.
The load factor
Domestic capacity is now at approximately 90 percent of pre-COVID-19 levels, the airline said.
Corporate demand is also said to be showing strong signs of recovery, averaging around 80 percent of historical levels for the past three months, according to the statement.
The Tasman market is building following the opening of the Trans-Tasman bubble in late April, with Air NZ saying capacity is currently at around 70 percent of pre-COVID-19 levels.
"Load factors on the Tasman are expected to recover gradually, with the airline focussing on offering customers a reliable and stable schedule of flying," the airline said.
The Cook Islands is seeing demand levels exceed those of pre-COVID-19 levels, but that route represents less than 2 percent of the airline's total pre- COVID-19 capacity, it said.
Long-haul international passenger travel remains highly restricted, with passenger volumes currently less than 5 percent of pre- COVID-19 levels as most international borders remain effectively closed.
"The cargo business continues to contribute strongly to Air NZ's revenue base, with the recent extension of the Government's Maintaining International Air Connectivity (MIAC) scheme providing the airline with the support needed to operate an average of 30 international flights per week until the end of October," the statement said.
For the 2021 financial year, Government financial support under the air cargo support schemes is expected to contribute between approximately $340 million in total cargo revenue.
The airline insists it has a strong foundation in its domestic and short-haul business which means it's prepared for the resumption of more international travel.
"After making structural changes to lower the cost base, while at the same time investing in key customer programmes, the airline is well positioned to capitalise when long-haul travel demand returns," Foran said.
"The airline has its eyes firmly set on the future as we move out of the survival phase and into revival mode.
"For us this means further strengthening our core domestic business and putting even greater focus on our customer obsession."
But the focus on customers won't result in any major changes and that comes down to cost.
"It means maintaining the hard-won structural cost reductions made across our business from the outset of this pandemic and ensuring continued cost vigilance," Foran said.
The airline has renegotiated the delivery date of the first of eight new Boeing 787 Dreamliners, which were ordered in 2019 prior to the outbreak of COVID-19.
The first aircraft was due to enter the fleet in the 2023 financial year but delivery has been pushed to the 2024 financial year.
The airline said it also retains the ability to utilise a number of further contractual delivery deferral rights on other aircraft due to be delivered from 2024 onward.
The Government loan
Air NZ confirmed there has been no further drawdowns on the Crown standby loan facility since the interim results were announced on February 25.
This means the total amount drawn down remains at $350 million, out of the total available amount of $1.5 billion.
The airline is still planning to undertake a capital raise before September 30, a portion of the proceeds from which will be used to repay any amounts drawn under the facility.