Air New Zealand draws on ‘last resort’ loans

New Zealand’s emergence from the COVID crisis has come in the nick of time for the national carrier.

Air New Zealand CEO Greg Foran has revealed some of the extraordinary challenges the COVID crisis threw at the airline. Picture: Hannah Peters/Getty Images

New Zealand’s emergence from the COVID crisis may have come in the nick of time for the national carrier, which has begun drawing on a government loan facility once described as a last resort.

Addressing Air New Zealand’s annual general meeting in Auckland on Tuesday, CEO Greg Foran said he had dealt with a number of different disasters and crises in his career to date but nothing like this.

“I have never been part of an organisation where your revenue disappears in a matter of weeks for a substantial period of time,” Mr Foran said.

“COVID-19 has fast evolved into the most financially threatening event that has ever faced our industry and indeed our economy.”

After forecasting a profit of between $277m and $324m for the 2020 financial year, Air New Zealand slumped to an $81m loss when passengers fell in April from 330,000 a week to under 8000.

Mr Foran said one of the greatest challenges to face the airline throughout the crisis, was responding to customers after cancelling four million seats in the space of a few weeks.

“A credit solution was implemented but not fast enough,” Mr Foran said.

“That had calls reaching 56,000 in just one day in our call centres.”

He said the airline was still working on a self-serviced digital solution for customers with more complex bookings but around 70 per cent had been able to access travel credits and redeem them online.

Although international flights remained on hold, Mr Foran said the domestic business was taking off following the removal of social distancing requirements on September 14.

“We sold more than a quarter of a million tickets in a 72-hour period – the strongest volume of domestic sales we have ever seen over three days.”

Despite the lift in bookings, Air New Zealand had drawn just over $100m from an $833m standby government loan facility to steer the airline through the pandemic.

Air New Zealand chairman Dame Therese Walsh said total available liquidity was about $930m, including $200m cash on hand and the balance of the loan.

“We continue to expect average monthly cash burn to between $60m and $78m on a go forward basis,” said Dame Therese.

“Cash burn for August and September was higher than this, as we expected, due to the timing of refunds, remaining redundancy payments and fuel hedge close out costs.”

More than 4000 of the airline’s 12,000-strong workforce had been axed as the carrier prepared to be a smaller operation for some time, and Mr Foran thanked suppliers for their understanding of Air New Zealand’s difficulties.

He said the management team was now working on a refresh strategy for the airline called “Kia Mau” which translated to “get ready”.

“We know that we need to be really sure that everything we do, from the routes we offer, the fleet we fly and the on-board services we provide, makes sense in this new world,” said Mr Foran.