Following what was the worst year on record for air travel, the industry in New Zealand continues to be pounded, with suspension of the transtasman bubble just the latest blow.
And the phrase "shelter in place", first heard widely last in March last year, continues to hang over the industry in this region.
Air New Zealand this week said losses will blow out further in the current financial year, and analysts at Jarden have now downgraded their target share price for the company. They also say the country's biggest airport, Auckland, will have its balance sheet stretched if Tasman traffic remains low into next year.
As Qantas stands down 2500 staff, an airline body warns that aviation workers' jobs here are at risk although Air New Zealand has not stood down any crew because of the transtasman bubble pause.
Passengers face continued disruption.
Among new cancellations announced this week, Air New Zealand
is ditching its three-times-a-week services from Auckland to Vancouver and San Francisco between October 31 and the end of December. On Monday, Jetstar advised passengers that it has pushed out planned flights between Auckland and the Cook Islands to the end of March next year.
Air New Zealand expects its underlying loss before tax could now be as much as $530 million, worse than the $450m in previous guidance.
The company said that when transtasman travel resumes following the pause in the quarantine-free arrangement, the expectation is that demand may be slow to recover and there remains a risk of future suspensions. Travellers were warned last March that they were largely on their own if they were stranded overseas, and the Government reiterated that message for those travelling to Australia when quarantine-free travel briefly resumed.
Jarden analyst Andrew Steele said that when travel does normalise, Air New Zealand also faces higher jet fuel prices.
The airline would tap further into its government loan facility because of the suspension of the bubble and planned payments for aircraft.
The firm continues to forecast an underlying loss of $446m when the airline releases its result to June 30 later this month.
Steele said because there was no comfort in the balance sheet or earnings recovery profile, Jarden reiterated its sell recommendation and lowered its target share price from 95c to 90c. Shares today closed at $1.49.
''We retain our sell rating, reflecting our view that given [Air New Zealand's] requirement for what we expect will likely be a highly dilutive capital raise, material ongoing near-term losses and lack of comfort on the timing and trajectory of any earnings recovery, the shares present a negatively skewed risk-reward profile."
Risks included doubts over the timing of border reopening, changes to competition, fuel costs, foreign exchange and underlying consumer demand.
Headwinds for Auckland Airport
Jarden's Steele now covers Auckland International Airport and the firm has downgraded its rating of that company from neutral to underweight, and its target share price from $7.10 to $6.60. Shares closed at $7.20 today.
He said that in a Covid-impacted world, the airport company's operational and earnings outlook was inherently uncertain.
The underweight rating reflected a combination of factors: the company's share price was already expensive with its enterprise value broadly in line with pre-Covid levels, uncertainty about the timing and pace of volume recovery - especially with the Delta variant outbreak across the Tasman - the closure of the transtasman bubble raising prospects that banking covenants may be tested once the waiver period ends at the end of this year, and balance-sheet uncertainty pushes back the resumption of dividends.
He said Jarden now assumed there would be no dividend in the 2022 financial year.
Putting together assessments of passenger flows by market, passenger type (visiting friends and relatives, leisure and business) and the direction of travel (inbound versus outbound) results in passenger flows not reaching 2019 levels until 2025 under a base case (from the 2024 financial year). It could be pushed out to 2026 under the more pessimistic bear case.
Under that pessimistic case, the important transtasman travel volume would be just 25 per cent or so of pre-Covid levels.
The analysis showed that further near-term travel bubbles were unlikely to materially support earnings.
Markets with bubble potential highlighted Samoa, Tonga, French Polynesia, New Caledonia and Niue.
While opening these markets would be helpful for passenger recovery, in total they only accounted for about 6 per cent of 2019 seat capacity through Auckland Airport and had very seasonal passenger flows.
Jarden's base case is that New Zealand's border reopens towards the middle of 2022 and under this framework, key travel markets of Britain, the United States, Canada and travel hub Singapore could all result in solid passenger flows. There was greater caution around what was New Zealand's second biggest inbound market, China, where a Covid resurgence has this month led to lockdowns in cities including Wuhan.
Steele said it would be sensible to delay the aeronautical pricing reset - due to begin in July next year - until there is greater confidence in aircraft volumes.
Worst on record
The International Air Transport Association says passenger traffic volumes meant industry-wide revenue passenger-kilometres (RPKs) dropped by 65.9 per cent in 2020 compared to 2019.
There were around 1.5 billion passenger trips overall during the year.
That plunge was the largest recorded since global RPKs started being tracked around 1950.
Since 1990, the long-run industry average growth rate had been around 5.5 per cent a year, association figures show.
International RPKs decreased by 75.6 per cent compared to 2019 and domestic air passenger RPKs dropped by 48.8 per cent compared to 2019.
The number of routes fell by more than half, total industry passenger revenue fell by 69 per cent to $US189 billion ($269b) in 2020, and net losses were US$126.4b in total.
Last April, two-thirds of aircraft were grounded and last year one million jobs in aviation were lost.
"2020 was a year that we'd all like to forget. But analysing the performance statistics for the year reveals an amazing story of perseverance,'' said IATA's director general Willie Walsh.
''Many governments recognised aviation's critical contributions and provided financial lifelines and other forms of support. But it was the rapid actions by airlines and the commitment of our people that saw the airline industry through the most difficult year in its history."