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Walsh said on Tuesday afternoon that the company expected to go to the market with capital raising before June 2021 assuming there were no further material adverse developments.

“We are in the throes of completing a capital structure review and looking to finalise it in early 2021,” she said.

Dame Therese Walsh

Since the annual financial results were announced in August, the airline had drawn down $110m of the $900m Crown standby loan facility. The Government facility was at interest rates between 7% and 9% and a term of two years.

Walsh acknowledged the interest was high but said it reflected the credit environment at the time of the Covid-19 outbreak.

There were several matters that would determine how much of the $900m the airline would draw down, including the New Zealand border opening, as well as cargo, domestic and short-haul demand over next six months, Walsh said.

“Our total available liquidity as at 25 September is approximately $1bn, comprising $215m of cash on hand and $790m remaining on the Crown standby loan facility.”

Walsh recounted how passenger numbers plunged after March 2020 from 330,000 passengers per week to just 8000 weekly in April, flights were suspended to 5% of previous capacity, the dividend shelved, and capital reconstruction had to be undertaken.

Although a month had passed since the company’s annual results, “a high degree of uncertainty” still remained.

“Given the uncertainty surrounding travel restrictions and the level of demand as these restrictions lift, Air New Zealand is currently not able to provide specific 2021 earnings guidance. However, each of the scenarios we are currently modelling suggest we will make a loss in 2021,” Walsh said.

She added that a trans-Tasman bubble appeared unlikely until Christmas or later, and if border restrictions went on for longer than “medium to long term” it would require another review of operations.

In response to shareholder questions, chief executive Greg Foran said the airline would be focusing on digital developments and customer loyalty mechanisms with details announced in due course.

He said there was still work to be done on credits to customers.

Greg Foran

“Having to cancel four million seats in the space of a few short weeks saw us implement a credit solution quickly but not fast enough,” Foran said.

“That had calls reaching 56,000 in just one day in our call centres. In late July, we were able to launch a partial online solution, enabling around 70% of customers to access their credits and redeem them online.”

Foran acknowledged there was still work to be done to provide “a fully self-serviced digital solution for customers with more complex bookings or those who booked via a travel agent”.

“Please be assured that we continue to work on this and have implemented additional tools, such as allowing customers to pool credits with family members or use them on an entirely different ticket type or destination,” he said.

The company received $125m in Government wage subsidies, however, the airline was unable to save the jobs of more than 4000 people or 30% of its workforce.

Foran said some staff had elected to take leave without pay and would be the first to be re-employed when conditions allowed.

Other Government assistance included using tax relief and other legislative changes to increase short term liquidity.

Operating costs were reduced by extending terms with customers, cancelling $700m in capital expenditure, grounding the 777 widebody fleet until at least September 2021, and deferring delivery of five A321 Neo’s and one ATR72-600.

The aeroplanes going into hibernation would be flown to low humidity locations in New Mexico and California, stored and looked after by a small crew. It would take eight to ten weeks to get them in flying order again.

Four directors were re-elected with more than 99% of votes each. They were Linda Jenkins, Laurissa Cooney, Dean Bracewell, and Larry De Shon.

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The company said underlying net profit for FY20, which took into account one-offs such as gains from disposals and goodwill impairments, was $24.93m, down 48%.

Total revenue was $179.29m, down 10.6%, operating revenue was $165.7m, down 11.6%, and EBITDAF was $96.8m, down 22.9%.

CIAL said the fall in operating revenue all occurred in the fourth quarter of FY20, due to the impacts of lockdowns and border closures to combat the spread of Covid-19.

An interim dividend of $20m, or 35 cents per share, was paid to shareholders during the year, equating to around 90% of the distributable profit, but there was no final dividend and it appeared unlikely there would be any paid in FY21.

Domestic passenger numbers for the year fell 24.7% to 3.89 million and international passenger numbers dropped 25.9% to 1.31 million. Passenger numbers for Q4 of FY20 were down 86% on the same period last year.

“The past financial year has been ultimately defined by Covid-19, although it did not affect the whole year,” CIAL said.

“From July 2019 to January 2020, CIAL was operating in a normal environment with a continuation of the positive outcomes of the last few years. Covid-19 materially changed the operating environment from February 2020 onwards.”

The company said inbound tourism had been hit hard by the closure of New Zealand’s borders and it was “likely this situation [would] persist out into at least 2022”.

“The tourism situation can only change when the health situation does. We simply do not currently have enough hard facts about vaccines, therapies and/or future health management strategies.

“We must work from first principles and change our outlook as and when the health facts change.”

To cope with the impacts, CIAL had suspended dividends, rationalised operations, suspended or cancelled capex, asked all staff to accept wage and salary freezes for 18 months, and frozen recruitment.

The company received $1.6m from the Government Covid-19 wage subsidy during the financial period, and $980,000 post balance date.

It had also obtained new bank facilities totalling $145m since April for additional liquidity, as well as extensions on all bank debt maturing before 31 December 2020. That saw its debt to EBITDAF ratio increase to 6:1 during the period, up from 3.7:1 for FY19. Debt rose 25% from $472m in FY19 to $590m. Separate bond funding totalled $200m.

CIAL said its Novotel Christchurch Airport was now being used as a Government managed isolation and quarantine facility “providing a certainty of revenue stream until the end of the current contract in December 2020”.

Despite the downturn, the airport said the world’s desire to visit New Zealand had increased since the pandemic struck and the country would “remain a highly desirable and attractive destination for international visitors”.

CIAL said it believed its $45m purchase of 750ha of farmland at Tarras, Central Otago, for a new regional airport “would keep future generations of South Island residents and businesses connected to the rest of the world”.

“Our top priority is talking to the Central Otago community, especially people who live close to the site,” CIAL chief executive Malcolm Johns said.

“We have begun one-on-one discussions with community members to understand their thoughts, concerns and questions, no matter what they think of our idea, and gather all the information we can to shape any case for a new airport.”

The airport wanted to build a 2.2km, jet-capable runway and a small terminal building but there was “unlikely to be any construction on-site for at least five years, or maybe longer”.

Christchurch City Holdings Limited (CCHL), a wholly-owned subsidiary of the Christchurch City Council, owned 75% of CIAL and the New Zealand Government owned 25%.

CCHL reported on Friday that its total operating revenue for the group was $1.03bn in the year to 30 June 2020, down 4% on FY19.

“The main impact on this result was due to a drop in revenue by Christchurch International Airport Ltd of $22m in the fourth quarter of FY20, as a direct result of the Government’s decision to impose lockdowns and close borders in response to Covid-19 and the resulting impact on aeronautical and terminal lease revenue.”

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Chief executive Greg Foran told investors and analysts yesterday that the surge in demand had given the airline optimism about Kiwis’ desire to travel.

“In mid-June, we even saw a year-on-year increase in bookings and incredible demand as people visited friends and relatives with high volumes of leisure traffic as July school holidays approached,” he said.

Greg Foran

“We ended up putting almost 70% capacity back on the [domestic] network from early July.

“Demand was particularly high for jet routes to Queenstown and Christchurch with Queenstown, in particular, performing well ahead of last year.”

Business travel was also starting to return with corporate customers reaching 65% of pre-Covid levels.

Foran said that showed Kiwis still had an appetite to travel and that they felt safe flying with Air New Zealand.

“This is crucial in terms of our long term recovery,” he said.

The airline also had average domestic load factors of 80%, which was close to maximum capacity.

With the country’s borders closed, the airline had refocused its efforts on its cargo business.

Foran said the cargo business faced big challenges in the first half of the financial year due to the trade war between China and the United States, which led to increased price competition.

“In the second half of the [financial] year, we saw strong demand for cargo charters,” he said.

“In May, we were awarded more than 50 cargo flights a week under the Government’s international air freight capacity scheme moving crucial goods from New Zealand to Asia and Australia and North America.

“This has been a vital source of revenue. More recently we’ve also agreed terms with the Australian Government to run a similar service between Brisbane and the US.”

Cargo revenue for the year to June 2020 was $449m, up 15% on 2019.

“The green shoots on our domestic network and cargo business have been pleasing. We’re even seeing some substitution effects with Kiwis who would have travelled overseas exploring our beautiful country,” Foran said.

“However, without making significant long term changes to our business model and strategy these green shoots are not enough on their own.

“The number one determinant to our long term recovery is the reopening of our global borders.”

But there was too much uncertainty as to when that would happen.

“Our focus must be on protecting the foundation of our business and by that, I mean our people, our customers, our core domestic network, and our cost base,” Foran said.

“We have to remain as nimble and agile as possible so we can ramp up a network of profitable flying as soon as demand returns.”

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“These are extraordinarily challenging times for all of us in the New Zealand tourism industry,” chief executive Adrian Littlewood said

The company had reduced the number of employees by 25% from 600 and expected to make further staffing cuts as well as other measures.

Adrian Littlewood

The Government Covid-19 wage subsidy had provided $4.3m to employees.

The airport expected its after-tax profit for the year ending June to be hit by between $50m to $90m – last year’s after tax profit was $274.7m on revenue of $743m.

AIA issued two earnings guidances in March, with the first one expecting underlying earnings of between $210m and $235m.

It was soon followed by a second notice to NZX saying it had suspended all guidance.

International passenger numbers now averaged 800 per day at Auckland Airport, less than 5% of what they were six months ago.

“Airlines have been deeply impacted and the number of carriers operating here has fallen from 29 to 11. Daily flight numbers have also reduced, falling by 80% to 100 per day made up of domestic, cargo and repatriation services.”

Today’s announcement said the airport had made deep cuts to discretionary expenditure, suspended external consulting, reduced external contractors, reduced remuneration of directors and executives to 80%, lowered most other employees’ hours and salaries to 80%, suspended bonuses and short-term incentives, and implemented a hiring and salary freeze.

Capital expenditure on projects with completion value of more than $2bn had been suspended including the release of 90 contractors, and it had raised $1.2bn of new equity.

Several “significant items” contributed to the expected profit fall.

They included capital expenditure write-offs of $42m-$52m, capex termination costs of $70m, redundancy costs of $4m-$5m, bad debts of $10m, rent abatements of $62m to 67m, impairment of lease receivables of $16.4m.

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