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Air New Zealand expects $500m loss amid bubble pause

written by Isabella Richards | August 7, 2021
An Air New Zealand A321-271NX, ZK-NNG, shot by Victor Pody
An Air New Zealand A321-271NX, ZK-NNG, shot by Victor Pody

Air New Zealand expects an even higher 2022 fiscal year loss as the trans-Tasman travel bubble continues to disrupt travel between nations.

The airline said it expects a loss of NZ$530 million ($505 million) before tax and one-off items, compared with its previous forecast of NZ$450 million.

The carrier updated its loss expectations following its original forecast on 18 June.

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“The airline continues to assess the impact of this temporary suspension on passenger demand,” the statement said.

“In conjunction with an expectation that demand on the Tasman may be slower to recover following the re-opening of a travel bubble and that there remains a risk of future suspensions.”

In late July, Prime Minister Jacinda Ardern announced the trans-Tasman bubble would undergo a two-month suspension due to the latest COVID-19 outbreak in Australia.

This followed not long after the closing of its borders to Victoria in early July because of the Delta variant spreading.

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Australia, especially NSW, is experiencing a rapid increase of cases as it recorded its highest day of new infections reaching 291 today.

Parts of NSW have been in lockdown for almost two months, and Prime Minister Scott Morrison said until 70 per cent of the population has received the vaccination, lockdowns will continue.

As of today, 15 per cent of the population have been double-jabbed.

Air New Zealand has not drawn on its government Crown standby facility loan since February, but now expects to access the funds before the end of August.

Current drawings remain at NZ$350 million, as the total amount under the facility loan remaining is NZ$1.5 billion, an increase from NZ$900 million in April.

Air New Zealand added if fuel prices remain US$78 per barrel and the NZD/USD exchange rate remain at 0.70, it’s losses will not exceed the NZ$530 million – however, this could change quickly.

The Auckland-based carrier’s cash flow has consequently reduced, alongside expecting further payments to be made in relation to aircraft in the coming months.

While its operating cashflow has been impacted, the company highlighted domestic travel in New Zealand has kept it afloat during the trans-Tasman bubble pause.

The business has also benefited from one-off deferrals of around NZ$310 million in PAYE payments during the last two financial years as it held its ground, which will be repaid in 2022.

Air New Zealand has 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.

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