Air New Zealand has secured an increase in its government loan from NZ$900 million to NZ$1.5 billion.
The new deal is due to the business deferring its planned capital raise until later this year, owing to the positive news of fewer COVID cases and the opening of the trans-Tasman bubble.
Air New Zealand has also been forced to cut around 4,000 jobs, or around 30 per cent of the company, since the start of the pandemic and in February, announced a six-month, NZ$185 million loss before tax.
Chairman Dame Therese Walsh said all outstanding amounts under the loan will be repaid from the proceeds of the proposed capital raise, which will be a mix of debt and equity.
“There’s a huge amount of optimism in the airline as we look forward to trans-Tasman travel starting,” said Dame Therese.
“After a few months of operating internationally again, we expect to have a clearer view of the recovery path for the airline and the long-term capital structure to suit our future business.
“We’ve seen some clearing of COVID-19 clouds recently, with the extension of the airfreight capacity scheme, the rollout of the vaccine and the opening of the trans-Tasman bubble on 19 April.
“These developments are good news and fundamental to Air New Zealand’s return to success, but the storm hasn’t cleared yet. We have suspended our cash burn guidance while we take the time to see how these events might impact our outlook.”
Air New Zealand confirmed on Friday it has not drawn down any more cash from the loan since it announced it had accessed NZ$350 million in February.
It is targeting the capital raise to take place by 30 September 2021 and Deputy Prime Minister Grant Robertson has previously said the government would aim to maintain its majority ownership, which now stands at 52 per cent.
The positive news comes after chief executive Greg Foran revealed in November the airline was then burning through up to NZ$85 million per month.
Speaking at a tourism summit in Wellington, Foran said, “If nothing changes between when we started to draw down the loan around August, in about 12 months’ time you have got a bit of a problem.”
It also emerged in November that 385 international cabin crew were to be made redundant in addition to 550 furloughed staff who have not worked since July.
The month prior, Air New Zealand’s current chief financial officer, Jeff McDowall, revealed he would leave the company in the middle of 2021 after he helped oversee the planned capital raise.