The Air New Zealand Limited (ASX: AIZ) share price is bucking the trend today, rising against the overall ASX market sentiment. This comes after the company released its monthly traffic update for October and announced an extended contract award for cargo flights.
At the time of writing, the Air New Zealand share price is up 2.3% to $1.76. The S&P/ASX 200 Index (ASX: XJO) is 0.6% down to 6,809 points.
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What's moving the Air New Zealand share price?
The Air New Zealand share price is pushing higher today following an update that highlights recovering passenger traffic in its domestic market.
According to the update, the company advised that passenger numbers are down 50.6% to 690,000 from the prior corresponding period. While total passenger traffic is still sitting at around half, the latest results indicate an improvement in the travel market.
In addition, revenue passenger kilometres (a transportation industry metric that shows the number of kilometres travelled by paying passengers) sank to $442 million, reflecting an 85.5% drop. Again, this is a slight recuperation from last month's revenue levels against its comparable period, which saw an 87.3% fall.
While Tasman and long-haul flights still remain off for some time, the company's short-haul business is coming back online. Passenger numbers in this sector have been increasing in the past few months, and are down just 44.2% from October last year. In contrast, long-haul flights are down 96% over the same period.
Cargo flight contract award
Further to the traffic report, Air New Zealand announced it has been awarded four months of additional international cargo flights. The second phase under the New Zealand Government's International Air Freight Capacity (IAFC) scheme will see the contract run until 31 March 2021.
Under the agreement, the government provides financial assistance in supporting the cost of flying to ensure freight aviation remains free-flowing. In light of the new award, Air New Zealand is now operating an average 55 flights per week. It is expected that the company will receive somewhere between NZ$100 million and NZ$145 million towards cargo revenue.
As COVID-19 has thrown curveballs at the airline industry, the IAFC has indicated it will continue to provide support until international borders reopen. With this in mind, Air New Zealand anticipates its cargo revenue segment for FY21 to exceed FY20 levels.
Interestingly, the company said that its cargo revenue has grown from 10% to almost half of the group's entire monthly revenue. Despite the growth, Air New Zealand is still forecasting a loss in FY21.
Air New Zealand share price summary
Shareholders for Air New Zealand will be hoping for a full recovery in 2021, as the company was hit hard during COVID-19. The Air New Zealand share price fell to as low as 80 cents in March and has been slowly climbing its way back since then.
Today's share price represents its highest mark since the dramatic fall 8 months ago, but is still well off its $3 highs reached in 2019. The Air New Zealand share price is currently trading at $1.76, valuing the company at close to $2 billion.
