The closing of the trans-Tasman travel bubble is having an immediate knock-on effect for the country's national airline, with Air New Zealand now saying losses for next year are going to be bigger than earlier forecast.
And it is going to have to hit up the Government for more money.
The company's previously indicated that it would lose up to $450 million before tax for the financial year to June 30, 2021. And it had said that it expected losses of a similar magnitude for 2022.
Air NZ is due to report the financial results for the year to June 30, 2021 on August 26.
But now it says the losses next year could be up to $530 million. And it says it is going to have to this month dip back into the standby loan facility it has with the Government, which it hasn't accessed since February.
The facility is up to $1.5 billion and at the moment Air NZ has borrowed about $350 million.
It had planned to raise new capital from shareholders by June 30 this year, but earlier in the year deferred that to by September 30, 2021.
The latest update Air NZ has provided via NZX has given no update on the timetable for that capital raise.
This is the statement from Air NZ:
Given the current suspension of trans-Tasman quarantine free travel, Air New Zealand is providing an update on the 2022 financial year earnings guidance previously provided to the market on 18 June 2021, as well as an update on liquidity.
On 23 July 2021, the New Zealand Government announced the suspension of trans-Tasman quarantine-free travel for a period of eight weeks. The airline continues to assess the impact of this temporary suspension on passenger demand, 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. This has resulted in Air New Zealand reassessing its 2022 financial year earnings expectations.
The airline currently expects losses before other significant items and taxation will not exceed $530 million for the 2022 financial year, assuming a fuel price of USD78 per barrel and an NZD/USD foreign exchange rate of 0.70. The Company previously stated on 18 June 2021 that it expected losses before other significant items and taxation to be comparable to the 2021 financial year, being a loss not exceeding $450 million.
Operating cashflow has reduced as a consequence of the temporary suspension of trans-Tasman travel. This reduction in cashflow, in addition to planned cash payments relating to aircraft in the coming months, means the Company expects to draw down further on the Crown standby loan facility (“the Facility”) before the end of August 2021.
The Company’s operating cashflow remains positive due to continued domestic performance and the revenue contribution from the Government’s Maintaining International Air Connectivity scheme which is currently in place until October 2021. As discussed at the 2021 interim results, operating cashflow has also benefited from the one-off deferral of around $310 million in PAYE payments in the 2021 and early 2022 financial years, which will start to be repaid in the 2022 financial year.
Air New Zealand has not drawn on the Facility since February 2021, therefore current drawings remain at $350 million. As disclosed previously, the total available amount under the Facility is $1.5 billion, and therefore the Company currently has remaining available funds of $1.15 billion under the Facility.