Air New Zealand has reported its first annual loss in 18 years, revealing the financial impact of the Covid-19 crisis on the airline.

The airline reported a loss of NZ$87 million (before taxes and other significant items) for the 2020 financial year, compared to earnings of $387 million in the prior year.

The carrier says Covid-related travel restrictions resulted in a 74 per cent drop in passenger revenue from April to the end of June compared to last year.

“Air New Zealand had a solid start to the year and was focused on driving profitable growth into the second half. We were also preparing to launch the first ever non-stop link between New Zealand and New York and had announced several exciting innovations in the customer experience space,” said Air New Zealand’s chairman Dame Therese Walsh.

“Now, nearly six months following the declaration of a global pandemic, the $87 million loss we are reporting today, our first loss in 18 years, reflects the quick and severe impact Covid-19 has had on our business,” she added.

The airline says it has secured a $900 million loan from the New Zealand government to help it through the coronavirus pandemic. The carrier’s short-term liquidity as of August 25 stood at approximately NZ$1.1 billion, including the government loan.

The carrier said it was burning cash at an average of approximately NZ$175 million per month from April to June, including “higher than average refunds, redundancy payments and fuel hedge close out costs”, but this reduced to NZ$85 million in July.

In June and July, the country moved to Alert Level 1, the lowest level in its four-tier alert system as local Covid-19 transmissions were reduced to zero. The airline says during these months, it experienced “heavy demand” for domestic travel and was operating around 70 per cent of its pre-Covid-19 domestic network.

The carrier said it is now operating a reduced domestic schedule to and from Auckland as New Zealand has entered Alert Level 3 due to the resurgence of Covid-19 in the country. The majority of the rest of Air New Zealand’s network has remained unchanged, but there is now physical distancing on planes, noted the carrier.

If social distancing restrictions are lifted, the airline said it could reduce its cash burn to NZ$65-85 million per month.

“Given the uncertainty surrounding travel restrictions and the level of demand as these restrictions lift, Air New Zealand is currently not able to provide specific 2021 earnings guidance. However, each of the scenarios we are currently modelling suggest we will make a loss in 2021,” said the carrier on its website regarding its outlook for next year.

“It is clear that Covid-19 is unlike any other crisis the aviation industry has experienced and we will need to be more nimble than ever as borders reopen,” said chief executive officer Greg Foran.