Air New Zealand Limited [NZX:AIR] has seen its share value deteriorate by over 40% today. This has happened because of an exceptionally acidic mood in the markets.
Air New Zealand — established in 1940 — is the country’s beloved national airline, operating flights to domestic and global destinations. It has a strong presence on the New Zealand Stock Exchange, as well as the Australian Securities Exchange.
The company’s share price is currently $0.870, and it has a market capitalisation of $976 million.
Why has the [NZX:AIR] share price plunged today?
The coronavirus pandemic continues to disrupt the tourism and travel industries.
This negativity has hit Air New Zealand, and its woes have been compounded by today’s announcement.
Here are the key highlights:
- The Kiwi government currently has a 52% stake in Air New Zealand.
- It has used its influence to push through a bailout package for the company.
- This comprises a loan of $900 million, to be paid back within a 24-month time frame.
- The interest rate charged for this will range between 7% to 9%.
The stock market did not receive this news favourably.
Various analysts have estimated Air New Zealand’s expenses to hover between $160 million to $211 million a month. The general consensus is that this bailout may only keep the company afloat for a limited time. The hefty interest rate also presents an additional burden.
It’s bad news all around.
Falling passenger numbers, cancelled flight routes, and a prolonged climate of fear have reinforced the bearish mood.
Where could [NZX:AIR] go from here?
The immediate impact on shareholders is a grim one — the upcoming March 25th interim dividend of 11 cents per share will be cancelled.
For now, the outlook for Air New Zealand is negative.