In light of the current suspension of trans-Tasman quarantine free travel, Air New Zealand provided investors with an update on its 2022 financial year earnings and liquidity guidance.
On 23 July 2021, the New Zealand Government announced the suspension of trans-Tasman quarantine-free travel for a period of eight weeks. As a result, Air New Zealand said it is continuing 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. Subsequently, the airline has reassessed its 2022 financial year earnings expectations.
Air New Zealand 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.
In addition, operating cashflow has reduced as a consequence of the temporary suspension. This reduction in cashflow, as well as planned cash payments relating to aircraft in the coming months, means the company expects to draw down further on its Crown standby loan facility before the end of August 2021.
Air New Zealand’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. Operating cashflow has also benefitted 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, while the total available amount under the facility is $1.5 billion.