Air NZ to dip into govt standby fund after latest Covid-19 restrictions

Air NZ plane on tarmac
Photo credit: Getty

Air New Zealand is set to make another substantial call on the government's standby fund, as it also mulls whether to insist domestic travellers are fully vaccinated before being allowed to fly.

The company's annual meeting has heard that the rebound in domestic tourism and business travel has been hit by the latest lockdown restrictions, and earnings have been affected, with the airline operating at only 40 percent of normal levels.

The chairperson Dame Therese Walsh said the airline was burning cash, but said it was no longer forecasting how much because of uncertainty. It had previously said the burn was between $25-$35 million a month.

She said the airline was focused on preserving its liquidity, but it would need to dip again into the government $1.5 billion standby loan, of which it had already drawn $445m.

"We expect to draw down further on the Crown Standby Loan Facility to temporarily fund the delivery of two new narrow-body jet aircraft and one turboprop, which are expected to arrive in the next few weeks. In addition, from January through March of 2022, the airline will repay approximately $300m in deferred PAYE to the IRD."

She said by the end of next February the airline would have drawn down a total of $900m.

Walsh had no news on the airline's prospective capital raising delayed at government urging from earlier this year and now expected by the first quarter of next year.

Asked if the airline would make vaccine certificates mandatory for domestic flying as is planned for international flights from next February, Walsh said it has been discussed.

"Currently that is not our policy ... but it is certainly on the table and certainly a point of current discussion amongst us."

Hope to fly high

Chief executive Greg Foran told the meeting it has been working on refining its strategy and travel offers to be ready to take off when restrictions are lifted at home and abroad.

This would include new routes, more frequent flights, better prices, and adapting services to the changing nature of work.

Its overseas ambitions included a quick return to the lucrative North American market, when border restrictions allowed.

''We're planning for New York and, as we see demand, we'll bring back Chicago and Houston, along with the other international destinations that make up the Air New Zealand network.''

Foran said the experience last year showed that business bounced back strongly when rules allowed, and that gave him confidence it would happen next year.

"I'm pretty confident that once we can planes into the air off a better cost base we can start generating some reasonably healthy returns. I'm starting to see that the end of Covid is coming."