Air New Zealand has disclosed details of its planned recapitalization, which should help it recover from the effects of the two-year Covid-crisis that hit the airline deeply. With the new NZ$2.2 billion package, Air New Zealand wants to repay an existing government loan. The government will participate in the package to retain a majority share in the airline. Air New Zealand to raise 2.2 billion to bolster financial position.

The recapitalization plan that was announced on March 30 consists of NZ$1.2 billion as a pro-rata renounceable rights offer, which allows existing shareholders (including the government) to buy more Air New Zealand shares at a discount price. New shares are offered for NZ$0.53 each, with the rights offering starting April 6.

Another NZ$600 million in redeemable shares will be issued, of which NZ$400 million will be financed by a proposed NZ$600 million debt capital markets issuance that is scheduled for June 30, depending on market conditions. The state or Crown will provide a new NZ$400 million loan with maturity until January 30, 2026.

The Crown is committed to participating in the rights offer to maintain at least a 51 percent share in ANZ. The state now has 51.9 percent in the airline. Participation of the Crown is deemed ‘critical’ to the success of the rights offer.

Proceeds used to repay Crown loan

Proceeds of the recapitalization will be used to repay NZ$850 million of the existing Crown Loan, while NZ$950 million is directed to strengthening the balance sheet and liquidity position and maintaining the airline’s Moody Baa2 credit rating. Including the new Crown Loan, liquidity is expected to remain above the target minimum level of NZ$700 million. ANZ will have another NZ$400 million as undrawn funding at its disposal. After the recapitalization, net debt should be reduced from NZ$2.8 to NZ$1.7 billion.

Since the start of the pandemic, ANZ received NZ$2.0 billion as a Crown Loan, received NZ$620 million in government aid to support its cargo network, got NZ$170 million in wage subsidies, plus NZ$140 million in other relief.

Air New Zealand reported a NZ$376 million statutory loss for the first six months of FY22 on February 24. Back then, it said that the full-year loss before taxation and other significant items would exceed NZ$800 million. In an update, the carrier now says it expects the loss to be below NZ$800 million as it has benefitted from the gradual relaxation of travel restrictions from April until a full re-opening in October. Beyond FY22, further losses are expected, subject to the level of recovery.

In a media statement, Chairman Dame of the Board, Therese Walsh, says: “While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity, recapitalize its balance sheet and repay the loan it received from the Crown during the Covid crisis. This is an important step in refueling for our recovery. The Rights Offer we are launching today is structured to provide all eligible Air New Zealand shareholders with a fair opportunity to participate.”

Pre-Covid ASK-levels not back before FY25

The airline wants to return to profitability by using its domestic network as a profit driver from late FY22/early FY23. As the international network returns in FY24/FY25, it will be optimized to include more targeted destinations in North America and Asia. Offering the new premium products and strengthening its loyalty program should help Air New Zealand to recover.

In all, the airline expects capacity (available seat kilometers) to reach ninety percent of 2019 levels only in FY25, so a full recovery is still some three to four years away from now. Its financial target is equaling EBITDA levels of 2019 of around NZ$1.2 billion in FY25, but this depends on numerous key assumptions on the lifting of travel restrictions, demand, (fuel) costs, the competitive environment, and geopolitical issues.

In its HY1 earnings release in February, Air New Zealand already provided an update on its fleet plans, which include the deferral of deliveries of some Airbus A321neo’s, ATR 72-600s, and Boeing 787-9s as well as the phasing out of eight 777-200ERs. Its seven 777-300ERs will be retired and replaced by the 787-10 no later than FY29.
Back in February, ANZ said that it had deferred the refurbishment of the interior of fourteen older 787s to beyond 2023. It says now that this isn’t expected to be earlier than mid-FY24 and will be staggered over years. The refurbishment is expected to cost between NZ$400-450 million. 

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Richard Schuurman
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Active as journalist since 1987, starting with regional newspaper Zwolse Courant. Grand Prix reporter in 1997 at Dutch monthly Formule 1, general reporter Lelystad/Flevoland at De Stentor/Dagblad Flevoland, from 2002 until June 2021 radio/tv reporter/presentor with Omroep Flevoland.
Since mid-2016 freelance aviation journalist, since June 2021 fully dedicated to aviation. Reporter/editor AirInsight since December 2018. Contributor to Airliner World, Piloot & Vliegtuig. Twitter: @rschuur_aero.

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