Air New Zealand ‘won’t survive without loan’: chief Greg Foran

Air NZ chief Greg Foran says the airline would struggle to survive the coronavirus crisis without a $884m government loan.

Greg Foran addresses a media conference in Auckland on Friday Picture: Getty Images

Air New Zealand chief executive Greg Foran has indicated the airline would struggle to survive an extended coronavirus crisis without the safety net of a $NZ900m ($884m) government loan.

The New Zealand government will make the loan available to the carrier in two tranches to be drawn on as needed in the coming months.

It follows drastic cuts to Air New Zealand’s capacity in response to vanishing demand for travel, which has seen scheduled services plunge from 3600 flights a week to fewer than 1500.

At the same time, the airline’s share price has crashed from $2.65 to $1, and 30 per cent of the 12,500-strong workforce have been asked to take unpaid leave.

Mr Foran, a former Walmart USA chief executive, said the loan was exactly what the airline had asked for, and it would “see them through” for as long as what they believed would be required.

“Any business when it’s faced with the changing revenue that we’re faced with — an 85 per cent reduction in international revenue that will probably go down even further, and a 65-75 per cent reduction in domestic revenue — you can’t take costs out of your business quick enough to deal with that,” Mr Foran said.

“So it is a really appropriate move that we’ve taken, and it puts us in a good position to focus on getting ourselves right-sized and building an airline we’re all going to be really proud of.”

He refused to speculate on how long it might be before flying schedules returned to normal, but said it was unlikely to be a fast ­recovery.

“As we come out of COVID-19, and at some point we will, there’s going to be two things that rest on our minds — the first is the state of the economy and how people are going to feel about travelling, and secondly the state of our competition,” he said. “We would expect the airline industry will look different at the end of this; not all airlines are going to survive and others are likely to operate in a different way.”

Qantas CEO Alan Joyce has also predicted the demise of other airlines and on Friday he infuriated Virgin Australia by suggesting the federal government should not help airlines that were “badly managed”.

Speaking on Sky News, Mr Joyce said it would be unfair for the government to nationalise the smaller carrier, which has not made a profit in eight years.

Virgin Australia CEO Paul Scurrah hit back at Mr Joyce’s “unhelpful comments” and said the current crisis was not the time for rivalry.

“This is not a game of Survivor. It’s a global pandemic creating unprecedented challenges that require unprecedented decisions,” Mr Scurrah said.

Regional Express Airlines joined the throng of carriers slashing services, cutting return flights from 565 to 331 a week, and suspending three routes including Adelaide-Port Augusta, Melbourne-Newcastle and Sydney-Armidale.

Network strategy general manager Warwick Lodge said the reductions alone would not be enough so Rex had also reached out to local councils seeking lower airport charges.

As the coronavirus crisis continued to deepen, credit ratings agency S&P forecast that passenger traffic at Australian and New Zealand airports would fall up to 30 per cent in 2020 compared to last year, and a full recovery would not take place until 2022-23.

Sydney, Melbourne, Brisbane and Auckland airports have already reported significant falls in traffic in February, and on Friday Gold Coast Airport released data showing a 2.1 per cent decline.

Queensland Airports CEO Chris Mills said the fall had accelerated this month, threatening to take passenger numbers back 20 years. “In the next few months we are expecting traffic to be around a quarter of what we normally see this time of year, including over what would normally be a busy Easter period,” Mr Mills said.