Air New Zealand's Greg Foran on coronavirus - bringing out a whole new playbook

Air NZ CEO Greg Foran: 'There's not a lot of point in flying planes that are empty' Photo / Supplied

Air New Zealand chief executive Greg Foran was going to spend a few months methodically working his way around the airline as part of a strategic review.

Instead he's found himself in the midst of the worst storm to hit the airline industry in nearly two decades as his company has to pull out a new playbook to deal with the coronavirus crisis.

The airline has now slashed capacity, introduced a hiring freeze, will tomorrow talk to unions about a leave without pay scheme and Foran himself has taken a 15 per cent pay cut.

At the airline's Auckland headquarters today, the former Walmart US boss said in his 41 years in retail he'd never seen anything like this.

The planned slower immersion into the business - where he was not doing interviews - has become crisis management and today he spoke to some journalists.

He's been thrust into learning the business at a rapid pace, he told the Herald.

"I'm loving that in one way. At the same time I'm very concerned that we make really good decisions because these are changing times, and we're dealing with a situation here that is not one that we have seen in the past."

Worldwide demand for travel is crumbling and airlines are the first to feel it. Air New Zealand first slashed capacity to Asia with more modest cuts elsewhere in its network but is now cutting its entire network by 10 per cent — or 3220 flights — in the next three months. Airlines haven't seen such sudden demand destruction since the 2001 terror attacks.

"There are some playbooks that you can pull out that can help. But this is different [in size] than the global financial crisis so just stepping through this is important."

Air New Zealand has cut its flights around its network by 10 per cent. Photo / AP

The 58-year-old said in one respect he was enjoying the challenge of dealing with the coronavirus crisis with an executive team that was meeting daily where it is said his airline outsider's view and calm approach has been very valuable.

He said the airline was already much different to the one he joined on February 3.

"It's quite different today than what it was then and continues to evolve and emerge."

Asked what the airline would do if the demand environment was the same in three months, he said it would be looking at the same levers it was pulling now - reducing capacity and costs.

''There's not a lot of point in flying planes that are empty, here we have to find somewhere to park them. Those are the sort of things that we're thinking about in terms of the hardest scenario that we're dealing with.''

Air New Zealand's wage bill was $1.35 billion last year, fuel $1.2b, aircraft operations $878 million and passenger services $319m.

''You've got to continue to look at these variable costs that you have in your business. And that's going to involve us sitting down with all of our stakeholders being very transparent and open about what we're working on, and coming up with the right solutions, both short, medium and long term because at a point in time, you know this is going to end.''

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Foran said that would mean the airline would be looking to grow capacity in what will be a race with rivals to return to normal and even grow market share.

''You've always got an eye on what you're dealing with today, what you think is occurring in three months time and then what this looks like in 12 months.''

Air New Zealand has paid big bonuses to non-salary staff in the past but these are unlikely this year and it must work through the difficult process of putting some among its 12,500 staff on leave without pay.

E tū union says there are good lines of communication with the company but its head of aviation, Savage, says workers it covers at the airline are particularly susceptible to the economic impact of Covid-19 because they are predominantly shift workers, so how much they earn fluctuates according to seasonal and daily flight schedules.

Pilots have been in regular contact with Air NZ management.

''I think people understand the situation that we're dealing with here. I'm sure that we'll work through this together,'' said Foran.

The fall in demand felt first in Asia and to a lesser extent on Tasman and domestic routes increased across the network towards the end of last week.

''That was reasonably significant last week and that led to us taking the action that we did this morning, which was to suspend guidance (for the full year). As I was talking to some of my colleagues around the world in the airline industry. They saw exactly the same thing and it became appropriate for us to take the action that we did this morning.''

Foran started as chief executive the day after it announced it was canning its Shanghai service and the day before a rescue flight from Wuhan landed. It was when Covid-19 was becoming a cascading medical and travel problem. Was his timing exceedingly bad luck?

''I honestly don't worry about those things. I just get on with whatever I've got in front of me, some days you get a tailwind and some days you get a headwind. You know one of the interesting things about airlines is you always need to be prepared for the next sideswipe.''

He said the airline had just gone through Rolls-Royce Trent engine problems and most recently demand falling due to the Australian bushfires.

''This one is quite significant and emerging and we're not sure where it's going to go. But we are a resilient business, a very capable team.''

He has volunteered to take a $250,000 or 15 per cent pay cut to his base salary of $1.65m. Other airline chief executives in Asia have also taken pay cuts in response to the coronavirus.

''It wasn't difficult to be honest. You know, this is quite a challenging process that we're going to have to go through. It's appropriate that, you know, that I lead and set an example.''

While there is a growing fear of flying, Foran said he had no qualms.

Air filtration on planes was hospital grade, the airline's cleaning process was thorough (he knows from working on the job) and is being further boosted.

''I don't have any issues with flying - in fact I was scheduled to be up in Seattle and meeting with Boeing actually flying out tonight but you know that's not appropriate that I'm out at this point.''

He knows the decision to travel or not is now a frequent topic of conversation.

''We're taking the appropriate measures that we need to but I also appreciate that this is a very personal topic and the sort of discussions around barbecues are going to be specific to individuals. From an Air New Zealand perspective, we're going to make sure that you get there safely. We're going to look after you.''