Air New Zealand chief executive Greg Foran. Photo / Alex Burton
There are signs that Air New Zealand is bouncing back after a tough couple of years but it continues to face uncertainty over the price of fuel, access to enough workers and the economic slowdown.
The national carrier reported an underlying loss of $725 million for the year to June 30, up from $444m in its prior financial year as pandemic restrictions reduced flight numbers and higher fuel and labour costs weighed on its result.
Air New Zealand chief executive Greg Foran said it was encouraged by its forward booking numbers and expected capacity to return to 75 to 80 per cent of pre-Covid levels in its next financial year.
"When I reflect back on where we thought we would be as we were organising ourselves for the capital raise back in February, I would say we are very encouraged by what we have seen."
Foran said July and August sales had been robust and ahead of where they had been expected them to be.
"Domestic is basically back to where we were pre-Covid."
The Australian market was also pretty good and he described ticket sales into the Pacific region as "decent".
"But obviously we are not doing much into Asia and Japan has historically been a big market for us.
"North America continues to develop and of course we are only now three weeks away from getting into New York."
But the airline gave no forward guidance on its FY2023 profit or any indication as to when it may be able to resume dividend payments.
"We have deliberately strayed away from guidance.
"Our intention is once we get ourselves in a position where we can afford to we will definitely be considering dividend payments but it is way too early to do that."
The airline was hit by higher fuel and labour costs in its FY2022 year with fuel costs rising from $311m to $560m and labour costs rising from $830m to $976m.
Foran said jet fuel pricing was continuing to move around a lot. After hitting a peak in April and May it had fallen back in the last few months only to rise again recently.
"It is pretty hard to tell where it is going to go. What I would say is every time that price moves by $1 it's a $10m impact to us. It is significant."
Getting enough workers also continued to be difficult. The airline had already brought 1500 staff back and was looking for another 1000.
"It's difficult. But we are getting there."
The airline was using referral programmes and increasing pay at the lower levels to entice workers.
"We have made good progress there. I would characterise our relationship with the unions as solid. It's a good relationship there and we are all rolling up our sleeves and getting on with it."
But union E tū's head of aviation, Savage, said the real challenge was to create an innovative and sustainable industry where workers got their fair share and could make a decent living.
"Cargo and logistics workers are leaving for better pay elsewhere. There are experienced aviation workers who can't afford to return to the industry, either because the wages are too low or because the work is too unstable."
Savage said there were also high-performing cabin crew who still hadn't been told why Air New Zealand won't rehire them.
"Air New Zealand's CEO has made it clear that a positive workplace culture delivers results, and we are confident that most of the company's leaders understand that creating good jobs and giving workers a real voice in how the airline is run is the key to building a safer and better airline.
"Collectively, this is what E tū union members want as well. The aspiration to achieve well-paid jobs and decent work is aligned. We just need to find ways to make it happen."
Foran said crew sickness levels, which saw it reduce flights earlier this month, had improved significantly.
"In the month of July we ended up cancelling 345 of 14,000 flights due to sickness and that number has come down to 80 and even this week it continues to come down more.
"We are seeing way less sickness out there."
On top of sickness it had also battled difficult weather conditions in recent weeks.
Foran said there had been five significant events in July alone - four days of fog in Auckland and one day in Wellington where it had to cancel 136 flights due to high wind.
"It has been a little bit disruptive but the team has managed through it well."
The airline raised $2.2b from shareholders in May to recapitalise the business.
Foran said Air Zealand still had $1.9 billion in cash and a further $400m Crown standby loan facility it could tap into if necessary.
But he said the airline had been cashflow positive for the last two months and did not foresee the need to use the facility.
"The liquidity position for the business is very strong. The whole recapitalisation process was well done, it was a good result with $1.9b cash, $400m standby facility. That's a very healthy position for the business to be in."
Mark Lister, head of private wealth research at Craigs Investment Partners, said Air New Zealand had made a big loss but it was expected.
"I don't think there was any surprise in the big ugly headline numbers."
The underlying profit was slightly worse than Jarden's forecast of a $707m loss but better than Craigs' expectations of a $740m loss.
Air NZ had signalled in June that its loss would be less than $750m.
Lister said the bigger story was the pace of the recovery and any operational issues that could be holding them back like the labour shortages that were impacting all businesses.
He said the capacity prediction was better than expected.
"They have got some momentum and they are heading back on track which is great. Operating cashflow was better than expected."
While there were positive signs there were still a lot of worrying issues, Lister said.
"Domestic capacity is looking good. A lot of people in the market had expectations a little bit lower on that.
"But then again you have still good fuel prices, labour constraints and still got the economy - we don't know which way it will go."
The airline's share price was down 1c to 66.5c by 3pm. It is down 28 per cent over the last year.
A large number of young Kiwis are leaving for Australia, although the rate may have peaked