Air New Zealand is bailed out with a $900million government loan as flights are grounded due to coronavirus
The New Zealand government will make available almost a billion dollars to Air New Zealand as the national flag carrier experiences severe coronavirus-related turbulence.
On Friday morning, Finance Minister Grant Robertson said up to $NZ900 million ($A890 million) could be loaned to the airline over the next two years.
‘Air New Zealand has a unique and critical role in our economy and society,’ Mr Robertson said.
The New Zealand government will make available almost a billion dollars to Air New Zealand
‘Without this intervention, New Zealand was at risk of not having a national airline.’
Airlines are among the businesses hardest hit by the spread of COVID-19.
Last week, Air NZ chief executive Greg Foran revealed plans to cut his 12,500-strong workforce staff by up to a third.
On Friday, Mr Foran said weekly flights were already down from 3600 to just 1500, with further falls to come.
‘The airline is going to be a little bit smaller than what it was when we went in because there will be a little bit of time before demand returns,’ he said.
Air New Zealand shares, which had been in a trading halt all week, dropped around 30 per cent on Friday after the announcement.
Mr Foran was bullish despite seeing a fall in international revenues of 85 per cent and domestic revenues by two-thirds.
‘We’re going to get through this. I’m very confident of this,’ he said.
Under the terms of the government assistance, the airline can draw upon the loan – provided at commercial rates – when its cash reserves fall.
The government, which owns 52 per cent of Air NZ, can buy more of the airline rather than seek repayment.
Unions – which represent around two-thirds of Air NZ’s workforce – praised Air NZ despite the mass job cuts, saying they were pleased with the airline’s engagement.
‘They have been open to true collaboration with unions and government, a model all employers should be willing to explore,’ NZ Council of Trade Unions president Richard Wagstaff said.
‘The loan facility means that union members can feel assured that company can meet any redundancy or restructuring payments to staff.’
Air NZ has also cancelled plans to issue a small dividend later this month as one of the terms of the loan.
It remains to be seen whether any international flights to New Zealand will be viable under the new border regime announced by Prime Minister Jacinda Ardern on Thursday.
Ms Ardern closed the border to all but Kiwis and established residents in an unprecedented effort to stop the spread of the global pandemic.
New Zealand has just 39 cases of the virus, with no deaths and just two hospitalisations.