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Air New Zealand seeks $600m government loan after annual loss

First deficit in 18 years driven by plane impairments and restructuring charges

The loan is designed to help the struggling carrier weather the coronavirus pandemic.   © Reuters

SYDNEY (Reuters) -- Air New Zealand Ltd plans to draw on a NZ$900 million ($596.34 million) government loan within days to help it weather the coronavirus pandemic after on Thursday reporting its first annual loss in almost two decades.

The airline forecast another loss this fiscal year as it reported an underlying pretax loss of NZ$87 million in the 12 months ended June 30, compared with a NZ$387 million profit a year earlier.

Stronger-than-expected domestic demand and increased cargo flying helped it beat a NZ$120 million loss the company had forecast in June. But the bottom-line figure blew out to a NZ$454 million loss, driven by aircraft impairments and restructuring charges.

"We have the facility with the government which we have not drawn on but we intend to do so in the coming days," Chief Financial Officer Jeff McDowall told analysts.

The loan, which boost the government's liquidity to NZ$1.1 billion, has interest rates of 7-9% and gives the government the right to seek repayment through a capital raising after six months or convert the loan to equity.

Air New Zealand has cut around 30% of its workforce and grounded most of its long-haul fleet in an effort to reduce cash burn amid strict international travel restrictions.

The domestic market had recovered to 70% of normal levels in July when New Zealand stamped out local transmission of the coronavirus, but a fresh outbreak in Auckland brought renewed travel restrictions that forced the airline to both cut capacity and comply with social distancing rules on its planes.

The carrier said ongoing uncertainty meant it could not provide detailed guidance for the current financial year, but added that it expected a loss under all potential scenarios.

If the domestic restrictions are lifted, the airline said it could reduce its cash burn to NZ$65-85 million per month, down from NZ$108 million in August.

The government currently has a 52% "hands-off" stake in the airline, a remnant of a 2002 bailout that followed a failed tie-up with Ansett Australia and the fallout from the U.S. Sept. 11 attacks.

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