Air New Zealand boss says no trans-Tasman flights until March

Air New Zealand chief executive Greg Foran.

Air New Zealand chief executive Greg Foran says quarantine-free travel between Australia and New Zealand is unlikely to resume for at least another six months, bursting hopes of a proposed "trans-Tasman bubble" opening before March next year.

The airline boss also says eliminating COVID-19 – something New Zealand was lauded for achieving in June before it was hit with a second wave of infections – was no longer a realistic goal, and that countries need to learn to live with the virus.

The 59-year-old former Woolworths and Walmart executive started at Air New Zealand on February 3 this year - just as the worst crisis in aviation since the Wright brothers took flight started to unfold.

"I never got to experience Air New Zealand in anything but a crisis," says Foran in his first major interview with an Australian publication.

Air New Zealand has been hit especially hard because it makes two-thirds of its earnings from international flying, which will remain shut off long after domestic travel has returned. That compares to one-third at Qantas.

The airline has laid off 4100 of its 12,500 employees since February with another 385 cabin crew jobs on the chopping block. And after falling to its first financial loss since 2002 – $NZ454 million ($416 million) in the red – it is tapping into a $NZ900 million loan from the New Zealand government, which owns 52 per cent of its dual NZX- and ASX-listed shares.

Air New Zealand has been hit harder than Qantas because it relies more on international flying. Credit: Bloomberg

Those shares have fallen 56 per cent since the start of the year, to $1.24, while Qantas’ are down only 44 per cent.

And while the COVID-19 crisis presents a once-in-a-lifetime test for the world's most experienced airline executives, Foran is tackling all this as a novice.

The native Kiwi ran Woolworths' Australian supermarkets division until 2011 and left when he was passed over for the role of CEO. He then spent the past nine years at American retail giant Walmart, becoming CEO and overseeing 4600 stores, a million staff and $US307 billion ($421 billion) in annual sales.

Air New Zealand, with revenue of $NZ5.8 billion ($5.8 billion) in 2019, is minuscule in comparison. But Foran says the job is not. "I’m learning a new industry... we’re dealing with the biggest crisis that’s ever hit that industry... and the government owns 52 per cent of the company," he says. "The combination of those things has made this as challenging as any role that I’ve ever had."

The big question for all airlines is when they can start flying again, where to and who will want to step on board. A month ago Foran said it would take at least until 2023 for demand to recover to pre-COVID levels but now says the outlook is less certain.

That's because while vaccines will likely start to roll out from the end of this year, they will not be 100 per cent effective - perhaps only 50 per cent, he says - while distributing them around the globe will take years. Even then, not everyone will get the jab.

"In America... they’ve recently done a survey over there and only half the people said they’ll take the vaccine," he says. "And then of course we have reinfection rates."

Australia and New Zealand's governments had both hoped to have a "trans-Tasman bubble" allowing unrestricted travel between the two countries operating by September, before second waves of infections hit Auckland and Melbourne. Prime Minister Scott Morrison raised the idea again at Friday's national cabinet meeting but Foran says it won't be happening any time soon.

"I certainly do not believe we will see anything across the Tasman this calendar year. It’s hard to believe it would be before March next year and could well be longer,” he says. "If it comes back quicker, we’re going to pop some champagne."

The Tasman is the busiest air route in and out of Australia, with Air New Zealand carrying just over a third of the 7.8 million passengers who made the hop last year, against fierce competition from Qantas, Jetstar and Virgin Australia.

(For Foran it's personal: he's got three children - including Canterbury-Bankstown Bulldogs five-eighth Kieran Foran - and seven grandchildren this side of the ditch.)

The United States has been increasingly important for the airline too on the back of an inbound tourism boom and it had planned to launch non-stop Auckland-New York flights this month. But Foran says flights to the US won't resume until the end of 2021.

Foran says international travel will be "clunkier" when it does restart. Passengers might have to undergo rapid COVID-19 tests before and after flights, and significantly improved tracking and tracing will be required. A vaccination "health pass" is possible too, he says, but the risk of reinfection could render that obsolete.

As Australia debates how best to handle the virus and business leaders line up to attack Victoria’s aggressive lockdown strategy and other states for keeping their borders closed, Foran says it is clear that wiping out the virus completely is not a realistic goal.

"Elimination, which is a worthy thing to go after, is probably not sustainable based on what we’re now learning, which is the vaccine is not going to be 100 per cent effective, not everybody is going to take it, and it’s going to take years to get distributed," he says.

"So the answer is a degree of moderation, I think, and those countries – and cities in the case of Australia – that work through that probably end up in a better position."

New Zealand declared in June it had eliminated the virus within its borders and was able to lift its country-wide lockdown. But an early August outbreak in Auckland saw a lighter level of restrictions reimposed.

Foran says there have been encouraging signs from his domestic business. While Qantas is currently operating 20 per cent of its pre-COVID capacity, Air New Zealand has scheduled 85 per cent of its normal capacity for October. Foran thinks it could be back to 90 or 100 per cent by December thanks to Kiwis unable to travel abroad travelling at home instead.

"There’s pent up demand - people are cabin crazy and they want to get out," he says.

Notwithstanding a domestic revival, Foran faces more tough decisions ahead even as life returns to what has calls "the new abnormal". That includes a taking a knife to its international network and possibly delaying an order for eight new Boeing 787 Dreamliners.