Ann: Air New Zealand liquidity and 2020 earnings update, page-2

Stock exchange listings: New Zealand (NZX: AIR) / Australia (ASX: AIZ) / ADR (OTC: ANZLY) MARKET ANNOUNCEMENTAir New Zealand postal address: Private Bag 92007, Auckland, 1142, New ZealandInvestor Relations email: [email protected] website: www.airnewzealand.co.nz/investor26 May 2020Air New Zealand liquidity and 2020 earnings updateAir New Zealand is today providing an update on its actions to reduce cash burn, as well as earnings expectations for the 2020 financial year following the precipitous decline in demand for air travel that has resulted from the outbreak of Covid-19.Liquidity positionPrior to the outbreak of Covid-19, Air New Zealand was in a strong position with a resilient balance sheet and short-term liquidity of more than $1 billion. The airline has no financial covenants on new or existing debt facilities and no significant debt maturities until 2022. The airline has taken and will continue to take swift and decisive action to preserve and enhance liquidity and minimise cash burn. As previously disclosed to the market, once the initial restrictions for international travel into New Zealand were announced in March 2020, Air New Zealand moved quickly to secure a loan facility of up to $900 million with the New Zealand Government, to bolster liquidity and provide the airline with sufficient flexibility to respond to a range of potential demand recovery scenarios. As at close of business 25 May 2020, short-term liquidity is approximately $640 million, which does not include any funds from the $900 million loan facility with the Government.“We have not yet needed to draw down on the government loan facility, as we continue to utilise all available levers to reduce our cash burn and right-size the business to reflect the expectation that, for some time, our airline will be smaller than it was pre Covid-19” says Chief Financial Officer Jeff McDowall.The airline has already implemented a number of actions across every aspect of its cost base and capital expenditure portfolio, including:• Labour reductions of approximately 30 percent, or 4,000 employees, which is expected to drive annualised savings of $350 to $400 million• Suspension of all short-term incentive schemes for the 2020 financial year• Reduction of the Executive team by 30 percent• A 15 percent reduction in the salary of the Chief Executive and Executive team, together with a 15 percent reduction in Director fees through to December 2020• Institution of a hiring freeze and voluntary leave options• Deferral or cancellation of almost $700 million in expected capital expenditure to December 2022, including deferrals of planned A321 NEO deliveries• Decision to ground the airline’s Boeing 777-200 and 777-300 fleet until at least the end of calendar 2020