Air New Zealand’s chief executive believes the airline will emerge from the coronavirus crisis after agreeing to government backing on Friday, but a rebound will take time.
“I’m pretty sure the airline’s going to be a little bit smaller than what it was, because it will be a bit of time before demand returns,” Greg Foran said at a media briefing on Friday, after the airline announced a government loan of up to NZ$900 million ($519 million).
He says that the carrier needs to take account of how economies will look after the crisis, how people feel about travelling and what the industry landscape will be.
“We would expect that the airline industry will look different at the end of this, not all airlines will survive. Others that are borne out of this particular event are likely to operate in a different way,” he comments.
Air New Zealand’s flight operations have dropped from about 3,600 per week to 1,500, notes Foran, who has only been in the job seven weeks. International revenues have dropped 85% and domestic is down 60-70%.
“You can’t take costs out of your business quick enough for that,” he says, and describes the government loan as a “really appropriate move”.
“We got out there and funded early. I think it puts us in a good position to focus on getting ourselves right-sized now and building an airline that we will be proud of going into the future.”
Foran says Air New Zealand management has growth scenarios forecast but it is a “moving target”. He declined to give numbers for these scenarios but repeated that job cuts could affect up to 30% of its 12,500-strong workforce.
Air New Zealand has the option to call on the government loan in two stages but Foran says the airline does not need the funds just yet.
“Our forecast at this stage indicates it’s not going to be necessary in the near term but if this goes on for month after month after month then that facility is available, but I don’t want to speculate on when that happens because I don’t know exactly,” he states.
He adds that the company also continues to speak to its banks regarding funding.
One of the conditions of the loan facility is that the government can seek repayment through a capital raise by the airline or converting the loan to equity.
Responding to questions about possible nationalisation of the carrier, Foran says he is focused on getting through the coming days and weeks.
“We’re in a good position at the moment, I feel comfortable with the actions we’re taking. We will worry about those sorts of things later.”
He adds that the airline aims to repay any loan used as quickly as possible.
The carrier is also looking at how to take advantage of cargo demand, such as on routes to Shanghai, and while domestic routes are being maintained, frequencies have been reduced.
Foran says the carrier has yet to decide on its other options, such as deferring aircraft orders, and explains that the focus is on immediate actions in a rapidly changing situation.