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Auckland, New Zealand - Air New Zealand announced that it would ground all of its  Boeing 777-200ER and 777-300ERs until at least the end of 2020 and defer planned Airbus A321neo deliveries as part of the cost-saving measures amid the global crisis.

Air New Zealand’s existing fleet includes seven 777-300ERs, between six and 10 years of age, and eight 777-200ERs, 13 to 15 years old.

The carrier also has seven  A321neos, and another seven A321neos scheduled for delivery between January 2022 and April 2024.

The airline also confirmed that it was expecting to report an underlying loss for the 2020 financial year while estimating hedging losses and aircraft impairments of up to $560m.

The airline, said that it has yet to draw on the Government's $900m loan, says while the recent move to Alert Level 2 allowed it to get its domestic engine turning again, it is clear that it will take some time for demand to return to pre-COVID-19 levels.

"We are preparing for a scenario in which the airline is still 30 percent smaller than pre-COVID-19 levels in two years" 

says chief financial officer Jeff McDowall.

For the second half of the 2020 financial year, Air New Zealand's network capacity is expected to be approximately 50 percent lower than the prior comparative period, driven by a reduction of approximately 90 percent in the fourth quarter.


In light of this and the fact, there was very little revenue coming in during Alert Levels 3 and 4, the airline is now expecting to report an underlying loss for the 2020 financial year.

It currently has $640 million of short-term liquidity, versus $1 billion prior to the outbreak. That doesn't include any of the $900 million Government loan facility.

"We have not yet needed to draw down on the government loan facility, as we continue to utilize all available levers to reduce our cash burn and right-size the business to reflect the expectation that, for some time, our airline will be smaller than it was pre-COVID-19" 

says McDowall.

In a market update, the company said it would feel the impact of $85m-$105m from fuel hedging de-designation, aircraft impairment charges of $350m-$450m, and reorganization costs of up to $160m in the full financial year.

Measures taken to minimize cash burn include slashing 4,000 jobs or 30 percent of the workforce, which is expected to drive annualized savings of $350 million to $400 million.

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