SYDNEY (REUTERS) – Air New Zealand reported a bigger annual loss on Thursday (Aug 25) due to the impact of Covid-19 restrictions on travel and could not promise a return to profitability this year.

Richard Thomson, the airline’s chief financial officer, told analysts that while it was expecting “a significant improvement in profitability”, fluctuations in costs led by fuel were making it hard to offer any assurances at this stage.

“We’ve seen a supportive yield environment, which certainly gives us some confidence in the short term… but, as I say, it’s very hard to give assurances that we can get back to profitability,” he said. The company is not providing an earnings forecast.

Air New Zealand recorded a fiscal 2022 loss of NZ$725 million (S$625.8 million) before tax and items, larger than the NZ$444 million loss a year earlier and Refinitiv estimate of a NZ $718 million loss.

The carrier said its total flying capacity for fiscal 2023 would be at 75 per cent to 80 per cent of pre-pandemic levels, a significant improvement in performance compared with 2022.

New Zealand began a gradual reopening of its international border in February in a boost to its national carrier. Domestic demand made a robust recovery following the removal of Covid-related curbs, though high crew illness levels during the winter season have forced the airline to trim some of its capacity.

Chief executive Greg Foran said when borders began to reopen there had been a spike in demand and it has held relatively steady since, with the North American market a standout.

Air New Zealand is launching a direct flight between Auckland and New York next month to make the most of this demand.

There have been fewer international carriers flying into New Zealand, which has also supported the carrier’s yields.

However, Qantas Airways said on Thursday that it was launching a rival service from Auckland to Sydney from June 2023.

Air NZ’s Mr Thomson said along with higher fuel costs the company was also dealing with increased navigation charges, landing charges and labour costs.

The company has mandated at least 4 per cent increase in wages for the coming year, but it is also making a concerted effort to increase base levels of pay amongst the lowest paid staff in the organisation.

Mr Thomson said wage growth would also be higher for specialist work groups such as engineers and in some cases pilots.