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Regional review continues, as decline in air traffic results in $31m loss for Airways NZ

News from Airways NZ
Airways New Zealand today announced a loss after tax of $31.3 million for the year ending 30 June 2020. The impact of Covid-19 travel restrictions from March saw a dramatic decline in air traffic levels and Airways’ core revenue streams. The Group result is down 233% on the prior year and includes a $48.7 million impairment of the asset base.

Importantly, Airways maintained its strong safety record with no near collision events in controlled airspace and no serious harm injuries involving our people.

“I’d like to thank our people for their resilience and commitment to keeping New Zealand’s skies safe even as they’ve faced uncertainty and personal challenges,” Airways CEO Graeme Sumner says. “Covid-19 has undoubtedly been an unprecedented shock to aviation, so we also acknowledge our industry colleagues who are facing the same challenges.”

Airways’ response to the pandemic has been to maintain safe operations, while taking prudent measures to manage costs. This has included a pay freeze and cancelling performance incentives for senior staff, and reducing headcount.In addition to cutting operating costs,Airways has reduced capital expenditure to $38.6 million, from a budgeted spend of $75.6 million.

Industry recovery is highly uncertain. Current forecasts indicate air traffic levels may only reach 50 per cent of pre-pandemic levels by mid-2021 and Airways does not expect to be back to profitability until at least 2023.

“With revenue limited and air traffic levels not expected to pick up for some time, we can only progress with investments in systems and technology that are critical to maintaining aviation safety,” Mr Sumner says. “We have had to put other longer-term projects on hold, including the development of drone detection technology and digital air traffic control towers.”

In March Airways received a $70 million equity injection as part of the Government’s Aviation Relief Package. Due to the ongoing uncertainty surrounding the recovery of the industry, in August the Government provided Airways with an additional $95 million uncalled capital facility, available through to the end of FY22.

Airways’ Board Chair Denise Church says Covid-19 has undoubtedly been the biggest shock to aviation in its history, and Airways is grateful to have received assistance from the Government.

“We appreciate this government support, which ensures we can keep essential aviation services running safely. But unfortunately it cannot realistically offset the revenue shortfall we will continue to experience for the foreseeable future.

“With taxpayer assistance comes a responsibility for Airways to reassess our business and services to ensure we manage costs effectively, and meet the changing needs of our customers who will require safe and affordable services going forward,” Ms Church says.

In May Airways announced plans to review its services provided from seven regional airports, where air traffic levels were low even prior to Covid-19. A robust process is now underway whereby independent aeronautical studies will examine and make recommendations on the airspace and operations at each airport. The Civil Aviation Authority will then determine what air traffic management services, if any, are required.

Airways subsidiary, Airways International Limited (AIL) has been less affected by the crisis, continuing to win new business even after the national level four lockdown. AIL is the commercial arm of Airways that delivers air traffic management consultancy services, training, and technology products worldwide. It has delivered a net profit after tax of $9.1 million, for the year ending 30 June 2020. This success will play an important role in bolstering Airways’ core business through the recovery and into future growth.

The most significant of the deals signed since the lockdown is a five-year contract with Norwegian air navigation services provider Avinor Air Navigation Services to install 16 TotalControl tower, surveillance and mobile simulators over five years.

“Airways’ international business is seen as a leader in its field and its contribution to NZ Inc over many years is something we are very proud of,” Mr Sumner says. “By shifting our focus to digital technologies, we are quickly gaining an even stronger market position in this new world.”

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