Air New Zealand has detailed how the coronavirus pandemic has all but wiped out its revenue this year and says it will start the process of laying off up to 3,500 workers this week

In an email to staff, chief executive Greg Foran says revenue is on track to plummet by NZ$5 billion ($3 billion) this year.

“Unfortunately, Covid-19 has seen us go from having revenue of $5.8 billion to what is shaping up to be less than $500 million annually based on the current booking patterns we are seeing,” he wrote in the email, sent on Monday evening.

That has the potential to be “catastrophic” for Air New Zealand, he said.

Foran states that the only way that revenue forecast will be improved this year is if Kiwis embrace domestic travel after the country leaves its current state of lockdown.

Under New Zealand’s current Level 4 lockdown, domestic travel is limited to essential workers. All others have been told remain home, except for essential shopping and medical care.

“The harsh reality is that most countries will take a cautious approach to allowing international tourism in the next year, New Zealand included,” he says in the email.

“And international tourism flows make up two thirds of Air New Zealand’s revenue. So, that is billions of dollars in ticket sales we won’t be booking and more than 1.5 million tourists who won’t be arriving here to fly on our domestic network.”

Foran expects Air New Zealand will therefore be a “much smaller” airline after the crisis, adding it could take years to get back to its former size.

“We expect that even in a year’s time we will be at least 30% smaller than we are today,” he predicts.

Air New Zealand has cut 95% of its flights as it battles the crisis and has agreed a standby loan from the government of up to NZ$900 million.

Its current focus is on international cargo flights and domestic flights for essential workers, although many of those are operating at low loads and have been cancelled or consolidated, according to posts on social media by chief revenue officer Cam Wallace.

Wallace states on Twitter today that the airline’s cargo and engineering teams are looking at extending cargo capacity by retrofitting a Boeing 777-200.

Foran says with a monthly labour cost of NZ$110 million and little revenue coming in, Air New Zealand’s cash balance will fall by tens of millions of dollars each week. He predicts the carrier will need to draw on that government loan within months.

The carrier will therefore start 3,500 job cuts within its 12,500-strong workforce this week, commencing with staff in international regions. Local job cuts will follow once a final plan has been agreed in the coming days.

“The extent of this reduction is based on conservative assumptions and we may have to change these as the situation evolves, especially if the Level 4 Alert goes beyond the planned 28 days or border restrictions are in place for a prolonged period,” Foran cautions.