The Impact of Covid-19 on the Profitability and Liquidity of Air New Zealand: Compare with the Whole Airline Industry

Abstract

As an industry sensitive to changes in external factors, the airline industry has been affected negatively by the Covid-19 outbreak. Global travel restrictions sent shock waves throughout the industry, and Air New Zealand is no exception. This study investigates the impact of Covid-19 on the profitability and liquidity of Air New Zealand and the whole airline industry based on financial ratio and regression analysis. The profitability and liquidity are represented by Operating Return on Assets (OROA) and Quick Ratio. Twenty commercial airlines from around the world were chosen as samples to examine how Covid-19 affected the overall airline industry's profitability and liquidity. This study compares the effects of Covid-19 on their profitability and liquidity in an effort to identify commonalities and variances. The study results show that both liquidity of Air New Zealand and the whole airline industry received a significant and positive impact from the Covid-19 pandemic due to the airline's private remediation measures and government interventions. In addition, the study found that the profitability of Air New Zealand was not received significant and negative impact by the Covid-19 pandemic like the whole airline industry due to the cargo schemes supported by New Zealand and Australia. This study is helpful for airlines and the government to formulate remediation measures and policies to facilitate the recovery of the airline industry. Finally, this study recommended that governments can place orders to airlines to support the recovery of the airline industry. And each airline can diversify its sources of profitability to mitigate the negative impact of Covid-19.