Air New Zealand flags $77 million full-year underlying loss

Air New Zealand expects to report an underlying loss of up to NZ$120 million ($77 million) for the financial year (FY) ending 30 June.

“The New Zealand government’s recent move to Alert Level 1 has enabled the airline to slowly restart the domestic network, however revenue and earnings are significantly lower than expected prior to the outbreak of Covid-19”, it says in an 18 June disclosure to New Zealand Exchange.

This figure, for underlying loss before other significant items and taxation, does not account for any changes to fuel price for the rest of June and currency fluctuations for the entire month, though Air New Zealand does not expect these to be material given reduced flying activity.

At current exchange rates, the company expects to recognise a NZ$70 million non-cash gain within significant items during FY 2020.

Other significant items that will impact the airline’s financial results are unchanged from its previous disclosure on 26 May.

Air New Zealand expects to book a non-cash aircraft impairment charge of NZ$350-400 million, which it previously stated relates to some of its Boeing 777 aircraft. It expects to gain approximately NZ$21 million from the sale of airport slots.

Reorganisation costs could come up to NZ$140-160 million, versus a NZ$13 million estimate in the interim financial results released on 27 February. Full-year losses on hedges are estimated at NZ$85-105 million.

The company anticipates a NZ$46 million non-cash charge arising from the disestablishment of fair value hedges, an estimate unchanged from interim results.

Air New Zealand on 9 March withdrew its FY 2020 earnings guidance of NZ$300-350 million, due to significant uncertainty around the duration, scale and impact of the global coronavirus outbreak.

This had been disclosed on 24 February, with an estimated NZ$35-75 million impact from the pandemic, and revised downwards from an earlier, 28 January guidance, of NZ$350-450 million.