Foran: Airline industry won’t be the same

20th March 2020 By Shannon Williams | shannon@tourismticker.com | @tourismticker

Greg Foran

The airline industry is going to look a lot different once the impacts from the Covid-19 outbreak subside, says Air New Zealand’s Greg Foran.

The airline’s chief executive today updated media on the state of the company following the announcement this morning of a $900m loan facility from the Government.

“We were operating 3600 flights per week – that is going to fall to below 1500 over the next few weeks. This business looks different, feels different, to the one that it was seven weeks ago, and it is likely to be that way over the next few months.”

Foran said he is focused on giving the airline the best chance possible of coming out the other side of the Covid-19 crisis.

“I’m pretty sure the airline is going to be a little bit smaller than what it was before we went in, because there will be a little bit of time before demand returns.”

He said it was vital to get the business ready, not just for today, but for the future.

“As we think about the environment that we are going to be faced with as we come out of Covid-19, and at some point, we will, there is going to be two things that rest on all of our minds. The first is the state of the economy at that point and how people are going to feel about travel, and the second one is the state of the competition.

“Air NZ does not operate in isolation. We would expect the airline industry to look different at the end of this – not all airlines are going to survive. Others that are born out of this particular event are likely to operate in a slightly different way than some of the competitors today.”

The airline’s $900m loan facility from the Government would help it get through the downturn in travel.

“As we have gone through our forecast, $900m is the right number for us. I can’t speculate more than anyone else about how long this will go on for and its impact, but based on our best forecasts, we are very happy with that number,” said Foran.

“So securing finance quickly is something that was very important to us, and we are working through with the Government who are a major stakeholder to see the appropriate course of action to cope. We wanted to get on and do that quickly.”

The airline was working through a number of scenarios in how its staff would be affected by the downturn.

“We’ve been pretty clear right from when this became obvious that we were dealing with a significant event, that up to 30% of our workforce may be affected,” said Foran.

“There are a number of options in terms of how we handle that. Leave without pay is one, people taking leave is another, people working on a part-time basis is a third option we can investigate, voluntary exit is another one which we will be discussing, and, of course, if we need to take redundancies we will take redundancies.

“We are going to get through this. I am very confident of that. At some point, we will see bookings begin to grow and we’ll start putting some more flights back on. I can’t speculate on exactly when that is. I’m comfortable we’ve put in place the right funding arrangements at this point for the airline and we are in a good position to continue to operate with the support of not only our customers but with the Government.”

Foran said Air NZ’s international revenue fall by 85% in recent weeks and its domestic income had been reduced by 65%-75%.

“How long this particular event goes for determines how quickly you burn cash and what actions you take short-term in order to lessen the burning of cash,” he said.

“I think we are in a good position now to focus on getting ourselves right and, more importantly, building an airline that we are all going to be really proud of going into the future.”