Air New Zealand projecting financial loss for 2020 despite cutting 4000 jobs

May 26, 2020

The airline says it has cut $400 million by slashing staff and grounding aircraft.

Despite cutting 4000 jobs, Air New Zealand is still projecting a loss for 2020.

The national carrier hasn't yet drawn on Government funds, though, instead cutting costs in other ways - including reducing jobs by 30 per cent which is expected to drive annualised savings of $350 to $400 million, according to its latest market update.

Air New Zealand's chief executive and other executives have also taken a 15 per cent reduction in their pay, as well as enforced a hiring freeze, The carrier has also cancelled non-essential spending, a reduction in leasing costs and modification of various vendor and supplier terms.

The airline also decided to ground it's Boeing 777-200 and 777-300 fleet until at least the end of calendar 2020.

With those changes and more, the airline says it expects to reduce its average monthly cash outflows by approximately $50 million to $60 million for the 2021 financial year.

Chief financial officer Jeff McDowall said that "like all businesses at this time, we find ourselves facing an environment where revenues will be a small fraction of what we are accustomed to".

The national carrier continues to struggle as travel numbers have turned into a trickle.

As of yesterday, the company's short-term liquidity was $640 million - not including any funds from the $900 million loan facility with the Government.

Air New Zealand was reporting a good start to the 2020 financial year, but as a result of Covid-19 market conditions deteriorated dramatically in early March.

"Across March and April, Air New Zealand reduced its network capacity by more than 95 per cent as demand declined to almost zero following the implementation of the New Zealand Government’s travel restrictions," Mr McDowall said.

"The recent move to Alert Level 2 has been a welcome reprieve, allowing us to get the domestic engine turning again, however it is clear that it will take some time for demand to return to pre-Covid levels."

E tū union organiser Rachel Mackintosh says the airline needs “engaged staff if they're going to recover” from the Covid-19 upheaval.

For the second half of the 2020 financial year, Air New Zealand's network capacity is expected to be halved compared to the prior comparative period, driven by a reduction of about 90 per cent in the fourth quarter.

The airline is now expecting to report an underlying loss for the 2020 financial year. 

"Over the course of the last few months we have acted at pace to implement both short-term and structural cost saving measures to adapt to this new environment, and we will continue to seek out further opportunities to consolidate facilities, reduce capital spend, review fleet composition, supply chain costs and adjust our labour base further," Mr McDowall said.

"We know that demand for air travel will eventually rebound, so we are cognisant of striking the right balance between removing cost from the business and ensuring the airline is in a strong position to ramp up as demand recovers."

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