Air New Zealand to seek capital amid record losses

Air New Zealand intends to stage a capital increase by the end of March 2022 “or shortly thereafter, subject to market conditions,” a raise that the New Zealand Herald newspaper reported could go beyond NZD1.2 billion New Zealand dollars (USD804 million).

In an NZX stock exchange filing, the carrier outlined its plan to issue new shares as it posted a pretax loss of NZD367 million (USD246 million) for the six months to the end of December and predicted a record full-year pretax loss in excess of NZD800 million (USD536 million).

The airline, which is 52% owned by the New Zealand government, has been kept afloat with state aid totalling NZD2 billion (USD1.34 billion), most recently with a support package comprising NZD500 million (USD335 million) of additional liquidity announced in December.

“Steps to recapitalise the balance sheet are underway” including the equity capital raise, it said, adding that the government backs the planned measure and will participate in it to maintain its majority shareholding. It did not say how much it intends to raise on this occasion.

It previously announced it would conduct a capital increase in February 2021, only to defer it two months later, and once again postpone it four months after that – until the first quarter of 2022, it said at the time.

The company clarified that as of February 23 it had drawn down NZD760 million (USD509 million) of the NZD1 billion (USD700 million) state-secured facility it currently has access to. When the drawdown reaches NZD850 million (USD569 million), it intends to start issuing redeemable shares to the government, and this is expected in March.

Continued restrictions on international travel, a national lockdown that commenced in August 2021, and an extended period of travel restrictions for the Auckland region caused Air New Zealand’s operating revenue to decline by 9% during the half-year period, while passenger numbers were down 26% year-on-year, the carrier said in its statement.

CEO Greg Foran said that limited international travel on top of local lockdowns had “had a huge impact on this interim result,” adding: “The airline has typically derived two-thirds of its revenue from its international passenger network, and much of that was effectively grounded for the majority of the first half.”

However, New Zealand has now embarked on a gradual reopening of its borders and international travel is starting to pick up again.

“Looking further out to the end of this calendar year, we will be ramping up more passenger flights to North America and looking forward to starting up our direct service to New York JFK,” Foran said.