Air New Zealand has detailed plans to raise funds and boost its finances to help it recover and take advantage of an expected rise in travel when New Zealand opens its borders.
The carrier has been hit hard by New Zealand’s decision to close its borders back in March 2020 as the COVID-19 pandemic swept the globe. Passenger revenue is still only at 20% of pre-crisis levels, Air New Zealand said.
On March 30, 2022, the airline announced it is launching a recapitalization package worth NZD2.2 billion ($1.5 billion), comprising a NZD1.2 billion ($836 million) rights issue, the issue of NZD600 million ($418 million) debt on the capital markets, and an NZD400 million ($279 million) loan from the New Zealand government. The New Zealand government will take part in the rights issue meaning it will still hold a majority stake of around 51% following the issue.
“While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity, recapitalise its balance sheet and repay the loan it received from the Crown during the Covid crisis,” Air New Zealand Chair Dame Therese Walsh said in a stock exchange statement. “This is an important step in refuelling for our recovery.”
Earlier this month, the New Zealand government brought forward plans to open borders to tourists, hoping to give the economy a boost. Australians will be allowed to enter from April 12, with vaccinated tourists from visa-waiver countries, such as the UK, Germany and the United States, from May 1.
Air New Zealand said it has seen “some benefits” in the short time since the announcement but cautioned a large degree of uncertainty remains. Booking activity has been mainly on trans-Tasman and North American flights, including its direct New York service, while bookings for Asia and Pacific Island routes remain subdued.
Still, Air New Zealand said it is now expecting a slightly better financial result than previously anticipated for this year.
It now expects a full year loss before taxation and other significant items of less than NZD800 million ($557 million), compared to a previous prediction for a loss of more than NZD800 million. However, losses will continue after 2022, although the airline said the amount would depend on the return of travel demand.
Overall, Air New Zealand is expecting international air travel to return gradually through to 2025, when it expects to be at 90% of pre-crisis capacity levels. Profits should also return to pre-pandemic levels by then, the airline hopes.