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WE ARE ALL CONNECTED INTERIM FINANCIAL REPORT 2021 AIR NEW ZEALAND INTERIM FINANCIAL REPORT 2021 LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Kia ora koutou katoa Dame Therese Walsh Chairman IT IS EASY TO REFLECT ON customers these competitive prices to have been able to play such a critical THE LAST YEAR AND SEE and do so profitably. We are incredibly role in keeping New Zealanders connected ONLY THE DAMAGE THAT grateful to our loyal customers for their to each other during a time when COVID-19 HAS DONE TO continued support of the airline – the international travel is largely non-existent, OUR AIRLINE AND TO THE number of New Zealanders getting out and in supporting New Zealand’s economic and exploring their own backyard has INDUSTRY AS A WHOLE. recovery by moving key cargo in, out and been a delight to see. around the country. It is times like these that remind us that Air New Zealand is a key While it is true that this is a crisis like part of New Zealand’s infrastructure, and no other, the foundation of Air New WITH INTERNATIONAL our success is inextricably linked. Zealand, who we are, what we do, our PASSENGER FLIGHTS passion for customers and for innovating As we look ahead, 2021 looks set to SIGNIFICANTLY SCALED BACK, be a year of further recovery. With the to deliver a superior service, remains the OUR CARGO TEAM PIVOTED same. If anything, the importance of this vaccines steadily making their way THE BUSINESS VIRTUALLY foundation has only been amplified. across the globe, and our own supplies OVERNIGHT TO ENABLE here in New Zealand having arrived Compared to most of our global peers, US TO FLY MORE THAN 50 recently, we hope to see short-haul we are in a fortunate position. We have CARGO FLIGHTS A WEEK international travel restrictions begin flown every single day since Covid-19 UNDER THE GOVERNMENT’S to lift sometime during the 2021 began and have been operating a INTERNATIONAL AIRFREIGHT calendar year. While it is unclear what significant portion of our pre-Covid CAPACITY SCHEME (IAFC). the demand picture will look like when domestic capacity for almost a year borders reopen, the significant recovery now. In December alone, we released in our Domestic network suggests to us an additional 16,000 seats across These additional cargo flights have that when people feel confident in the the network due to stronger than resulted in a stronger performance safety of the travel environment, there is expected domestic demand. We also from the cargo business this year still huge desire to travel. sold over 500,000 seats for under and has provided the airline with vital $100 to further stimulate and drive cash flow during a time where we have Although our financial results continue this demand. Pleasingly, with the cost limited international passenger revenue. to be subdued, we are proud of what we efficient A321 NEO aircraft we have Importantly these flights have also helped have achieved since the outset of the redeployed from the Tasman to the us to repatriate more than 60,000 kiwis’ pandemic. Not only have we managed Domestic network, we are able to offer home since the crisis began. We are proud our way through the most significant 2 AIR NEW ZEALAND GROUP CONTENTS 2 LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER THE INCREDIBLE GRIT 6 FINANCIAL COMMENTARY THAT THE AIR NEW ZEALAND WHĀNAU HAVE SHOWN 8 CHANGE IN EARNINGS OVER THE PAST 12 MONTHS 9 CONDENSED INTERIM IS TRULY INSPIRING. FINANCIAL STATEMENTS 19 INDEPENDENT AUDITOR'S REVIEW REPORT Greg Foran Chief Executive Officer crisis to ever face the airline industry, NO MATTER WHAT AREA but our team have also made important OF THE AIRLINE YOU LOOK progress on the key initiatives we AT, EVERY SINGLE PERSON identified during our strategy refresh. IN THIS BUSINESS HAS The crisis has given us a unique FACED EXTRAORDINARY opportunity to reset our business – to look at each and every element of what AND UNIQUE CHALLENGES we do and the products we offer and SINCE COVID-19 FIRST TOOK really consider if they deliver value for A GRIP ON THE WORLD. our customers and our shareholders. In particular, we have spent a lot of time Although we are now much smaller thinking about how we can elevate the in number, we are just as fierce in our Domestic experience even further. Every commitment to this airline, to New customer on our network is different, Zealand, and most importantly to our so we have spent the last six months customers here at home and around talking to our customers, understanding the world. what they value most, and developing For all of the challenges that Covid-19 tools to cater to those needs. We also has presented, it has made us even continued to work on the strategic pillars more agile, innovative and resilient as we identified as part of our strategy a business. The way in which our team refresh late last year. While there is have gone about running this airline still much work to be done before we in the midst of a global pandemic is implement some of these exciting admirable. They have dealt with each innovations, we are very excited about and every obstacle thrown their way the opportunities this presents. with a huge degree of professionalism The incredible grit that the Air New and have ensured we stay true to our Zealand whānau have shown over the purpose of connecting New Zealanders past 12 months is truly inspiring. with each other and the world. We have Through their efforts we are positioned also delivered exceptionally high on-time to come out of this crisis strongly, with performance in the last six months, our competitive advantages intact. driven by operational flexibility and 3 AIR NEW ZEALAND INTERIM FINANCIAL REPORT 2021 LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER (CONTINUED) AIR NEW ZEALAND DELIVERED A LOSS BEFORE OTHER SIGNIFICANT ITEMS AND TAXATION 1 OF $185 MILLION FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 COMPARED TO EARNINGS OF $198 MILLION IN THE PREVIOUS SIX-MONTH PERIOD. THIS RESULT ILLUSTRATES THE CONTINUED CHALLENGES PRESENTED BY THE COVID-19 PANDEMIC. proactive disruption management, which Group operating revenues were loan facility (the Crown facility). The is an impressive effort. The new normal $1.2 billion, which represents a decline current drawn down balance on the we find ourselves in requires great skill of 59 percent on the prior six-month Crown facility is $350 million, resulting and dexterity to navigate and the reality period. This reflects limited international in short-term liquidity of just over $700 is, having now spent the better part passenger flying and the impact of New million as at 23 February 2021. This of the last year dealing with a state of Zealand’s second lockdown in August comprises undrawn amounts under the constant change, our team are the 2020. This was partially offset by Crown facility of $550 million and cash best equipped to drive the airline stronger cargo revenues, which were up on hand of approximately $170 million. towards recovery. 91 percent on the previous six months. Dividend In the meantime, we remain focussed Since the outset of the pandemic, on maintaining our operational agility the airline has meaningfully reduced The Board remains focused on and our ability to quickly respond to operating costs, by making the tough preserving Air New Zealand’s liquidity rapidly changing environments. As we decisions quickly. While some of those across a range of potential demand await the opening of a trans-Tasman or actions took time to fully implement, recovery scenarios. While the domestic Pacific Islands bubble, we have started we are now seeing the benefits of and cargo businesses are performing to bring some of our furloughed crew these in our results. Operating costs well, the airline continues to face back – you can be assured that when are down 58 percent on the prior period significant financial pressures as a borders open, we will be ready. on 65 percent less capacity and some result of Covid-19. As such, and in accordance with the terms of the of these cost reductions are expected Crown facility, there will be no interim Financial Results to be sustained moving forward. dividend for the 2021 financial year. Air New Zealand delivered a loss before These cost reductions have not only other significant items and taxation1 of helped reduce cash burn from around We would like to thank our shareholders $185 million for the six months ended $175 million at the start of the crisis, for their continued and unwavering 31 December 2020 compared to to an average of $79 million between support. Although Covid-19 is still earnings of $198 million in the previous September 2020 and January 2021, very much a part of our current day six-month period. This result illustrates they have also reduced the amount to day reality, we are seeing some the continued challenges presented by we have needed to draw down on the optimistic signs as we look ahead to the the Covid-19 pandemic. New Zealand Government standby remainder of 2021. We are determined 1. Refer to the Financial Commentary section on page 6. Losses before taxation were $104 million. 4 AIR NEW ZEALAND GROUP EXECUTIVE TEAM CHANGES that Air New Zealand will once again THIS YEAR WE WELCOMED deliver strong results for all of our LEANNE GERAGHTY AND stakeholders in the future. NIKKI DINES TO THE EXECUTIVE TEAM, LEANNE AS OUR Capital Structure and Liquidity CHIEF CUSTOMER AND SALES Air New Zealand has actively engaged OFFICER AND NIKKI AS OUR with the Crown as the company CHIEF PEOPLE OFFICER.

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