Air New Zealand to draw on govt loan after first annual loss in 18 years

By Jamie Freed

SYDNEY (Reuters) - Air New Zealand Ltd plans to draw on a NZ$900 million ($596.34 million) government loan within days to help it weather the coronavirus pandemic after on Thursday reporting its first annual loss in almost two decades.

The airline forecast another loss this fiscal year as it reported an underlying pretax loss of NZ$87 million in the 12 months ended June 30, compared with a NZ$387 million profit a year earlier.

Stronger-than-expected domestic demand and increased cargo flying helped it beat a NZ$120 million loss the company had forecast in June. But the bottom-line figure blew out to a NZ$454 million loss, driven by aircraft impairments and restructuring charges.

"We have the facility with the government which we have not drawn on but we intend to do so in the coming days," Chief Financial Officer Jeff McDowall told analysts.

The loan, which boost the government's liquidity to NZ$1.1 billion, has interest rates of 7-9% and gives the government the right to seek repayment through a capital raising after six months or convert the loan to equity.

Air New Zealand has cut around 30% of its workforce and grounded most of its long-haul fleet in an effort to reduce cash burn amid strict international travel restrictions.

The domestic market had recovered to 70% of normal levels in July when New Zealand stamped out local transmission of the coronavirus, but a fresh outbreak in Auckland brought renewed travel restrictions that forced the airline to both cut capacity and comply with social distancing rules on its planes.

The carrier said ongoing uncertainty meant it could not provide detailed guidance for the current financial year, but added that it expected a loss under all potential scenarios.

If the domestic restrictions are lifted, the airline said it could reduce its cash burn to NZ$65-85 million per month, down from NZ$108 million in August.

The government currently has a 52% "hands-off" stake in the airline, a remnant of a 2002 bailout that followed a failed tie-up with Ansett Australia and the fallout from the U.S. Sept. 11 attacks.


($1 = 1.5092 New Zealand dollars)


(Reporting by Jamie Freed in Sydney; additional reporting by A K Pranav in Bengaluru; Editing by Shinjini Ganguli and Jane Wardell)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel