Air New Zealand and the Government have agreed to delay a planned equity capital raising, originally planned to be completed by June 30, the airline said on Friday.
The proposed capital raising is now expected to be completed before September 30.
The national carrier, hit hard by the Covid-19 pandemic, said in February it planned to sell shares in the company by June. Analysts have said the airline may need to raise between $1 billion to $1.5 billion, although that could rise depending on how long the borders remained closed.
The Government, which owns 52 per cent of Air New Zealand, last year extended a $900 million loan to help support the business, and said in February it would take part in the capital raising to keep its majority shareholding. It had the ability to turn the loan to equity.
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Air New Zealand chair Dame Therese Walsh said on Friday that factors influencing the capital raising decision included the Covid-19 vaccination programme, the implications of border reopenings, and the announcement of the trans-Tasman quarantine-free travel bubble, starting on April 19.
In light of these evolving circumstances, the Crown and the company have agreed it would be appropriate to defer the equity capital raise to allow time to assess these evolving circumstances further, Walsh said in a statement to the NZX.
The proposed capital raising is now expected to be before September 30.
The Crown will provide an increased facility of up to $600 million, bringing the total available to Air New Zealand to $1.5 billion, to see it through until the capital raising.
The government loan or Crown Standby Facility, arranged just before lockdown in March 2020, will now be available through to September 2023, an extension of 16 months.
The loan, available through to September 2023, will continue to be in two tranches; $1.0 billion at 2.5 per cent to 5.0 per cent interest a year, and a second amount of $500 million at 4.0 per cent to 5.0 per cent per annum. A base rate calculated against the benchmark bank bill rate also applied.
Air New Zealand would repay the money borrowed from proceeds of the capital raising. The airlines borrowing remained at $350 million.
The start of the travel bubble was expected to improve the airlines cash burn, but Air New Zealand would not give updated guidance on how much cash it was burning through, Walsh said on Friday.
In February, when the airline posted a six-month after tax loss of $72 million, chief executive Greg Foran said Air New Zealand had burned through a huge $1 billion in cash reserves since the start of the pandemic.
Cash burn fell to an average of $79 million a month from September through January 2021, and in February Air New Zealand said average monthly cash burn of between $45 million and $55 million was expected for the five months to June 30.
The airline is a strategic asset for the Government, given its key role in supporting international tourism and export industries, and the domestic travel network.
In a letter to Air New Zealand on Thursday, Finance Minister Grant Robertson said the Government remained committed to being the airlines majority shareholder.
I recognise that the last 12 months has been an incredibly challenging time for Air New Zealand, and like others in the airline industry globally, Air New Zealand has required support from its shareholders, Robertson said.
The Government expected Air New Zealand to continue to be the national carrier, maintain a comprehensive domestic network, to remain committed to environmental sustainability, and to continue acting as a responsible corporate citizen.
It was also expected to continue operating as a profitable and commercially sustainable business.
