Air New Zealand has revealed a $72 million net loss for the six months to December 31 as it remains pinned down by travel restrictions in response to Covid-19.

The result follows a $454m loss for the 2019 financial year, which included a $338m write-down to the value of its long-haul fleet, and a $101m profit for the same six-month period a year ago.

The airline today reported an underlying loss before significant items of $185m for the first half of this financial year, compared to $198m in the previous corresponding period.

Analysts were expecting an underlying loss of around $220m for the half-year.

Chairman Dame Therese Walsh said while the results from the first half were "still significantly subdued", she was optimistic that the changes made to the business over the last year or so have set the airline up well for when borders reopen.

Short-term liquidity as at February 23 was just over $700m, consisting of cash of approximately $170m and $550m of undrawn funds on its $900m government loan. The total amount drawn on the Crown facility is $350m.

Air New Zealand has said it would raise equity before June 30, with the Government confirming it will retain its majority stake in the national carrier by participating in the capital raise.

At present, the government owns 52 per cent of the airline. The airline has been burning through between $65m and $85m in cash a month and has said it wants to minimise its reliance on the taxpayer loan - with interest rates of up to 9 per cent.

The Herald reported last week that Air New Zealand would need to raise as much as $1.5 billion to repay the government loan, top-up working capital and cover the cash it needs to keep going until the border reopens.

Dame Therese said the airline is seeing benefits from a lower cost base.

"Since the initial travel restrictions were introduced in early 2020, Air New Zealand has taken significant actions to reduce its cost base. While some of these actions have taken time to implement, we are now seeing the benefits of these efforts flow through into our results. Compared to pre-Covid times, operating costs excluding fuel in the first half of this financial year declined more than 50 per cent, and some of these are expected to be sustainable cost reductions moving forward."

"This will be pivotal as we enter recovery mode as it means we will not only be highly cost-effective, but with the changes we have made to our fleet, we will also have one of the most modern, efficient fleets in the world.

"The board and I know that the rapid implementation of these changes would not have been possible if it were not for the skill and determination of our people. I want to thank our team, who in the face of much adversity, change and uncertainty has been resolute in their focus on delivering for our customers," Dame Therese said.

Air New Zealand's labour costs had decreased by 42 per cent, driven by 38 per cent reduced headcount, suspension of incentive pay and receipt of the Government wage subsidy.

Operating revenue declined 59 per cent to $1.2b in the first six months as network flying was substantially reduced by 65 per cent.

Air New Zealand said its domestic capacity was at 76 per cent of pre-Covid levels, led by robust domestic tourism.

Cargo revenue was up 91 per cent on the prior period, now equating to approximately 35 per cent of its previous long-haul business.

Chief executive Greg Foran said the interim results should be read in the context of a global pandemic that has virtually suspended international air travel.

"I could not be more proud of the way our team have gone about operating our airline in the midst of this crisis. They have dealt with each and every obstacle thrown their way with a huge degree of professionalism and frankly, we wouldn't be operating the level of domestic and cargo capacity we are without their extraordinary efforts.

"While we made significant changes to our business and cost base, and did this more quickly than most airlines, since the outbreak of the pandemic we have still burnt through over $1 billion in our own cash reserves – that's just huge. We have been fortunate to receive significant financial assistance from wage subsidies and the Government's aviation relief package throughout the first half of the financial year, as well as benefiting from lower fuel prices, however, these benefits are not expected to extend into the second half of the financial year.

"From the start of this crisis we have had to make a lot of incredibly tough calls, especially where our people are concerned, and that is never something we would do lightly – but it has all been with the sole purpose of ensuring Air New Zealand's survival. The fact is, we must remain vigilant and disciplined in our approach to cost management and cash burn while borders remain closed," Foran said.

Uncertain outlook

Air New Zealand said it's cash burn averaged about $79m per month from September 2020 through January 2021 - compared to an average cash burn of $175m per month in the fourth quarter of the 2020 financial year.

It is now estimating average monthly cash burn for the remaining five months of the financial year of between $45m and $55m while international travel restrictions remain, assuming no further local lockdowns or social distancing requirements.

"This reflects lower expected refunds and redundancies compared to the first half of the financial year," Air NZ said.

Commenting on the outlook, Foran said there was still a large degree of uncertainty surrounding the lifting of travel restrictions and the subsequent level of demand so the company was not providing 2021 earnings guidance at this time.

"Despite strong domestic and cargo performance, the scenarios we are currently modelling suggest we will make a significant loss in 2021."

Continued financial pressures from Covid-19 and restrictions of the government loan meant no interim dividend for the 2021 financial year.

text by Duncan Bridgeman, NZ Herald