New Zealand’s national carrier is well on the way to emulating its national symbol: a flightless bird at risk of extinction. Like the kiwi, Air New Zealand’s possible demise is the result of predators and the loss of its natural habitat – international air travel – due to human interference. In its case, though, the predator is the same creature depriving it of its habitat: the New Zealand government.
Prime Minister Ardern, in sticking stubbornly to her “elimination” strategy, has thereby closed New Zealand’s borders for the foreseeable future. Every week that New Zealand’s borders are closed costs the airline tens of millions. Those tens of millions will soon be coming straight out of taxpayers’ pockets.
COVID has delivered a $900m blow to Air New Zealand’s bottom line with the airline sinking to its first loss in 18 years.
The kiwi carrier has announced an overall loss of $578m ($NZ628m) before tax for the 2020 financial year, down from last year’s $349m profit.
The underlying loss was $80m, down from a $354m profit in the 2019 financial year.
With cash liquidity of just over $1bn, the airline was expected to start drawing on a $823m loan facility from the New Zealand Government in coming days.
Eventually, even other peoples’ money runs out. Whatever the airheaded theories of Modern Monetary Theory might say, even governments can’t just spin money out of thin air.
In a way, you have to feel sorry for companies like Air New Zealand. This is a situation entirely out of their control, which they could scarcely have seen coming. While crisis planning for a global pandemic should have been lurking in the consciousness of big companies for years, it’s fair to say that no-one could have imagined the sheer scale of the disproportionate panic over the Wuhan virus.
Chief executive officer Greg Foran, who only took up the role in February, said “to say it had been an incredibly challenging six-months was putting it mildly.
“Within the course of a few short weeks we went from transporting 330,000 passengers a week to 8000 a week,” Mr Foran said.
“And six months into this crisis it is certainly not looking like it will be a V-shaped recovery.”
That’s putting it mildly, indeed. Ardern has locked herself into a closed-border policy. As a scientist recently quoted by The BFD has said, “I would not dignify waiting for a vaccine with the term ‘strategy’. That’s a hope not a strategy.”
Going forward, Air New Zealand expected the monthly cash burn to be in the range of $59m to $77m while international travel restrictions remained.
Already more than 4000 jobs have been lost from Air New Zealand, representing 30 per cent of the workforce.
Air New Zealand is limping along, feeding on whatever scraps it can ferret out from the domestic market, but those are comparatively slim pickings. Even those keep getting rudely snatched away every time Ardern reflexively hammers on the lockdown button whenever someone in Auckland sneezes.
Mr Foran said it was encouraging to see strong domestic demand when restrictions were eased in June and July.
But the reinstatement of restrictions in early August demonstrated the uncertain environment in which the airline was now operating[…]
No specific guidance was provided for the 2021 financial year due to the uncertainty of the COVID crisis but another loss was expected.
Air New Zealand, like companies and citizens across New Zealand, have seen the ground repeatedly ripped out from under their feet by a panicked and incompetent government.
If you enjoyed this BFD article please consider sharing it with your friends.