Air New Zealand Announces 2021 Financial Result As It Continues To Navigate Covid-19 ImpactsFinancial results summary
· Operating revenue of $2.5 billion, down 48 percent on the prior year
· Cargo revenue up 71 percent on the prior year, supported by the New Zealand and Australian Government’s IAFC, MIAC and
IFAM schemes (the airfreight support schemes)[1]
· Loss before other significant items and taxation of $440 million[2]
· Loss before taxation of $411 million
· Domestic capacity rebounded strongly as the year progressed, reaching 93 percent of pre-Covid for the three months
ending July, driven by strong leisure demand and the return of corporate customers
· Latest domestic nationwide lockdown expected to negatively impact financial operating performance
· Liquidity of $1.3 billion as at 24 August 2021, comprised of $183 million cash and $1.15 billion of undrawn funds on
the Government standby loan facility (the Facility)
· Dividends remain suspended
· Planned capital raise deferred to first quarter of calendar year 2022
Air New Zealand has announced a loss before other significant items and taxation of $440 million for the 2021 financial
year – its first full 12-month period of operation with Covid-19 related international travel restrictions. Using the
same metric, the company reported an $87 million loss for the 2020 financial year.
Statutory losses before taxation, which include a $29 million gain from other significant items, were $411 million,
compared to a loss of $628 million last year.
The financial result benefited from approximately $450 million of Government assistance including airfreight support
schemes as well as further subsidies and initiatives that are not expected to be repeated to the same extent in the 2022
financial year.
Ongoing border restrictions saw operating revenue decline 48 percent to $2.5 billion as international flying was
significantly reduced, with capacity down 55 percent on the prior year, although cargo flying revenue grew by 71 percent
compared to the prior year thanks to airfreight support schemes. The airline’s domestic business performed strongly, led
by strong leisure demand as well as corporate customers flying at close to pre-Covid levels.
Chairman Dame Therese Walsh says the 2021 financial result reflected the reality of a year in which the airline was
unable to fly two-thirds of its passenger network.
“In a severely constrained environment, Air New Zealand maintained cost discipline, focusing on delivering with
excellence in the areas in its control. The return of a strong domestic business and growth in the cargo services that
underpin our key export markets was a reminder of the airline’s crucial role in New Zealand’s infrastructure,” says Dame
Therese.
“Air New Zealanders showed agility during constantly changing operating conditions, managing reopenings, pauses and then
closures while generating new revenue from additional cargo routes and increasing domestic and regional passenger
capacity to match an increased demand for domestic leisure travel.”
Dame Therese paid tribute to the continued commitment and sacrifice of the Air New Zealand team.
“To keep New Zealand connected to key markets, help Kiwis continue travelling and manage continued disruption to
passengers’ travel plans, Air New Zealanders have again proven their aroha for customers. From our airport employees and
flight crew who are among the most frequently tested groups in the country, to all our other operations and corporate
teams across the network who have worked tirelessly behind the scenes to keep our customers and cargo moving, their
efforts have been extraordinary.”
“These efforts, after 18 months of reduced pay and forfeited incentives, were recognised earlier this year when we
announced eligible employees would each be provided with a $1,000 award of shares or cash. With significant uncertainty
ahead, including the current lockdown, this was important recognition of the people who give so much to our business.”
Chief Executive Officer Greg Foran said the 2021 financial year was one in which the airline played the hand it was
dealt, kept planes flying every day and took some important steps in the delivery of its refreshed strategy, Kia Mau.
“Our people developed new capabilities and dexterity, adapting quickly when conditions changed. Although the return of
long-haul travel seems some time away, the changes the team made this year will serve us well when it returns,” he says.
“We have reimagined our domestic business, increasing the choice of flight times and introducing greater price
differentiation for peak and off-peak flying. This allows us to offer more lower priced fares, which will unlock new
demand for domestic tourism.”
“We capped fares to ensure travel isn’t out of reach when it’s needed most, reintroduced the popular Fast Bag service
with new features, and improved our unaccompanied minors service to make travel easier for our most valuable cargo and
safer for our people.”
“We had fun with our customers, trialing new inflight food and beverage options, made changes – while retaining the
much-loved cookie – and will showcase great New Zealand products in the year ahead.”
Mr Foran says the airline also took meaningful steps towards its goal of net zero emissions by 2050.
“With almost daily reminders of the impact of climate change, we are supporting the development and deployment of
electric, hybrid and hydrogen aircraft for domestic use, and engaging and collaborating with others in the private
sector and the Government to make sustainable aviation fuel (SAF) supply a reality in New Zealand.”
“We also made some exciting enhancements to our AirpointsTM loyalty programme, adding more store partners, improving
access to upgrades and increasing the ability to share benefits among family and friends.”
“Strategic digital investments towards our goal of being ‘the world’s leading digital airline’ included equipping our
turboprop aircrew with devices to replace paper-based systems, introducing a new supply chain management system and
improving self-serve options for customers to use credits and manage bookings.”
Mr Foran also acknowledged the ongoing uncertainty in the airline’s operational and financial performance, including
following the latest Covid-19 cases in New Zealand and subsequent lockdown.
“More than ever, this is a time to look after our people who continue to deliver those essential services, keeping cargo
moving and getting Kiwis back home.”Capital raise and liquidity
As announced on 13 August 2021, Air New Zealand received a letter from the Minister of Finance outlining his view that
the current environment is not sufficiently certain and stable to enable the Crown to provide a firm pre-commitment to
support a planned equity raise at this time. In this context, the airline has, in consultation with the Crown, decided
to further defer its planned capital raise from 30 September 2021 until the first available window in the first quarter
of calendar year 2022.
Given the critical role that the airline has in New Zealand’s economy and society, the Crown has again confirmed its
longstanding commitment to maintaining a majority shareholding in Air New Zealand. Subject to Cabinet being satisfied
with the terms of the airline’s proposed capital raise at the relevant time, the Crown has again confirmed that it will
participate in an equity capital raise by purchasing the number of new shares necessary to maintain a majority
shareholding.
On completion of the recapitalisation, Air New Zealand expects to repay all amounts drawn under the Facility. The Crown
has confirmed to the airline that it shares this expectation.
Until the capital raise is completed, the airline has access to sufficient liquidity under the Facility, with $1.15
billion in remaining funds that allow it to continue operating and investing activities. Air New Zealand has drawn $350
million on the Facility as at 25 August 2021 and expects to draw down further in the coming months.
The airline’s operating cashflow for the 2021 financial year benefited from the one-off deferral of around $254 million
in Fringe Benefit Tax (FBT) and PAYE payments, which will start to be repaid in the 2022 calendar year. An additional
$60 million of FBT and PAYE is expected to be deferred in the first quarter of the 2022 financial year and repaid before
31 March 2022.Dividend update
The Board continues to focus on preserving Air New Zealand’s liquidity, and given the ongoing uncertainty and continuing
financial pressures on the airline, has determined it will not declare a final dividend for the 2021 financial year.
Air New Zealand’s Board does not expect to consider payment of dividends before the airline’s earnings and gearing
substantially recover, and in the context of a supportive macroeconomic environment.Outlook for 2022
Given uncertainty surrounding the current national lockdown, ongoing international travel restrictions and uncertainty
regarding the level of demand as these restrictions lift, Air New Zealand has suspended 2022 earnings guidance.Summary financial resultsJun 2021$MJun 2020$MMovement%Operating revenue2,5174,836(48.0%)Loss before other significant items and taxation(440)(87)(405.7%)Other significant items29(541)105.4%Loss before taxation(411)(628)34.6%Net loss after taxation(289)(454)36.3%Operating cash flow32323040.4%Gearing71.0%69.2%(1.8 pts)Other significant items
Other significant items, representing a gain of $29 million in the 2021 financial year, were made up of $143 million of
foreign exchange gains on uncovered debt and a gain of $21 million related to the sale of Heathrow landing slots
partially offset by aircraft impairment and lease modification costs of $78 million, reorganisation costs of $39 million
and the de-designation of hedges as a result of forecast transactions no longer expected to occur of $18 million.
[1] In March 2020 the New Zealand Government established the International Airfreight Capacity (IAFC) scheme to support
aviation carries to continue to provide capacity on key international airfreight routes. Following the success of this
scheme, the Government introduced the Maintaining International Air Connectivity (MIAC) scheme to support air services
through to the end of October 2021, with the potential for an extension to March 2022. The Australian Government
introduced the International Freight Assistance Mechanism (IFAM) in April 2020 to keep global airlinks open to Australia
and awarded the contract to Air New Zealand in August 2020. It has subsequently been extended to September 2021.
2 Losses before other significant items and taxation represent Earnings stated in compliance with NZ IFRS (Statutory
Earnings) after excluding items which due to their size or nature warrant separate disclosure to assist with
understanding the underlying financial performance of the Group. Losses before other significant items and taxation is
reported within the Group’s audited annual financial statements. A summary of Other Significant Items is provided at the
end of this release.