Air New Zealand losses deepen to $376m, capital raise plan still on 'subject to market conditions'

Air New Zealand's chair says 2022 will be toughest financial year yet. Photo / Brett Phibbs

Air New Zealand has plunged to a pre-tax loss of $376 million for the past six months and warns losses will exceed $800m for the full year.

The airline also said it intends to launch an equity capital raise- tipped as being beyond $1.2 billion before the end of next month "or shortly thereafter, subject to market conditions'.'

The loss is more than three times the $105m statutory loss before tax for the same period last year and is in line with most analysts' expectations.

Air New Zealand's chair says 2022 will be toughest financial year yet. Photo / Brett Phibbs

Chief executive Greg Foran said limited international travel on top of local lockdowns in the first half of the financial year had a huge impact on this interim result.

"The airline has typically derived two-thirds of its revenue from its international passenger network and much of that was effectively grounded for the majority of the first half."

After sporadic lockdowns in 2020 and 2021, Auckland's longer lockdown and border restrictions contributed to the loss in the first half and an extremely challenging time for the airline's 8400 staff.

Key financials

• Operating revenue 9 per cent lower than the prior period, driven by a 26 per cent decline in passenger revenue because of the national alert level restrictions and 107-day Auckland lockdown

• Cargo revenue increased 29 per cent on the same period last year to $482 million, supported by Government freight support schemes

• Fuel costs increased 14 per cent to $174m for the half-year, with the increasing cost of fuel expected to impact the second half

• Drawings under Crown Standby Loan Facility (the Crown Facility) are $760m as at yesterday

• Liquidity of $1.4b as at February 23, made up of approximately $170m of cash and $1.24b of available funds under the remaining Crown Facility and Redeemable Shares

• Steps to recapitalise the balance sheet are under way, including an equity capital raise that is intended to be launched by the end of March or shortly after, subject to market conditions

• Dividends remain suspended

• Current expectation for the full 2022 financial year is a loss before tax and other significant items that will exceed $800m

Continued restrictions on international travel, the national lockdown that began in August 2021 and the extended period of travel restrictions for the Auckland region hit the airline's operating revenue. Passenger numbers were down 26 per cent from the corresponding period in financial year 2021 and was down 84 per cent compared to pre-Covid levels.

Air New Zealand chief executive Greg Foran. Photo / Brett Phibbs

Foran paid tribute to his staff.

"I couldn't be prouder of our Air New Zealand whānau for what they've achieved this year so far. Everything from adding flights so Northland could remain connected to the rest of the country while the Auckland border was in place, to the digital solution for our customers to seamlessly upload their vaccine pass to their Air New Zealand app.''

In spite of the grim result, Foran said he could see light ahead for the airline as international borders reopen.

"Looking at what is happening around the world and at home, we can see the path back to the Revive phase of our Survive, Revive, Thrive plan. We have the right strategy, the right people and we are ready to fly.''

It was bringing back approximately 250 cabin crew and pilots and have restarted one of its Boeing 777-300s to do some of the cargo heavy lifting.

'''Looking further out to the end of this calendar year, we will be ramping up more passenger flights to North America and looking forward to starting up our direct service to New York City."

Chairwoman Dame Therese Walsh noted that although optimism for the future is well-founded, the 2022 financial year is the most difficult one yet for the airline.

''It would be easy to think the first year of the pandemic had the biggest impact on Air New Zealand's finances,'' she said.

However, only the final quarter of the 2020 financial year was affected, and in the 2021 financial year the airline was able to access relief support from the Government through various subsidies, PAYE deferrals and cargo support schemes. The domestic network largely kept flying across the 2021 financial year and the transtasman and Cook Islands bubbles gave a boost to the second half of 2021.

More Air New Zealand international services are resuming as borders open. Photo / Supplied

''The 2022 financial year has and will continue to be much more heavily impacted, both by continued suppressed demand and rising costs," said Walsh.

Oil today spiked to $140 a barrel, the highest level in seven years.

"As we've all seen at the petrol pumps, the cost of fuel has been significantly increasing – and although we have hedging strategies in place, we expect to see these rising costs start to come through in the second half and beyond."