Coronavirus: Air New Zealand executives scramble to get airline through crisis

Air New Zealand looks set to announce major cuts. Photo / File

Air New Zealand executives are working today on what are shaping up as radical cuts to its network following the Government's new restrictions on travel.

The airline is battling to keep as many of its 12,500 staff on but already up to 60 intern cabin crew were believed to have been made redundant late last week.

Aside from the Pacific Islands, the airline's international network has effectively been wiped out by the new restrictions requiring passengers to self-isolate for 14 days.

It is understood its international long-haul services will operate for the next two to three weeks to bring passengers home to New Zealand before being reduced to skeleton services to key destinations. The airline's transtasman services will also be hit by the restrictions which come into effect at 1am tomorrow and Air New Zealand and other carriers between Australia and New Zealand will make deep cuts to their schedules.

And more cuts are likely for Air NZ's domestic network as the international feed of passengers dries up as does the corporate market - the most valuable travellers - as more businesses forbid flying by staff. Capacity could be cut by a third and announcements could be made within the next day.

The cuts could reduce total capacity by close to two-thirds, dealing a massive blow to revenue, which was $5.78 billion last year. The airline is 52 per cent owned by the Government and chairwoman Dame Therese Walsh has engaged directly with Finance Minister Grant Robertson, and the airline's new chief executive Greg Foran is understood to have been in regular contact with Prime Minister Jacinda Ardern.

It has a strong balance sheet, including just over $1billion in cash and short-term deposit accounts for the six months to December 31.

Staff are being redeployed to other roles (such as under-pressure call centres), staff have been asked to take voluntary unpaid leave and pay freezes have been introduced.

The airline is balancing the demands to crew its reduced schedule with its labour costs, (its biggest expense in the last six months at $681m) and the need to be ready to ''spool up'' when the crisis eases and travel resumes.

Senior executives will meet four unions tomorrow to work through the latest developments.

Air NZ's domestic network faces more cuts as international arrivals dry up. Photo / Grant Bradley

The latest move by the US will put the airline's London-Los Angeles flight in question. Non-US citizens are prevented from entering that country, affecting the viability of any airline services across the Atlantic. Air New Zealand had planned to end the service in October but that could be moved forward.

It also is understood Air New Zealand is working with key cargo customers to look at dedicated freighter type flights to keep high-value exports going. Air and sea freight is not affected by the travel restrictions announced yesterday.

Airlines around the world are facing an unprecedented plunge in demand, with the latest US ban on flying between Britain and Ireland and that country a sign that all international passenger travel could largely cease until the coronavirus pandemic is under control or at least better understood.

Around the world, the breadth and scale of the demand shock will likely lead to more airline collapses.

Other airlines operating here are also scrambling to meet the new travel conditions when they start at 1am, with cuts or service suspensions likely to be announced at a rapid rate.

"Airlines are expecting a flurry of cancellations from passengers and expect to consolidate flights as passenger numbers reduce," said executive director of the Board of Airline representatives (Barnz), Justin Tighe-Umbers.

"We are asking all passengers to please be patient while airlines manage the enormous logistics around the new situation,'' he said.

"Airlines know they have a duty of care to get passengers home. They are used to major disruptive events, but the crisis around Covid-19 is unprecedented. This evolving situation will require patience from everyone."

Barnz represents 28 airlines operating in this country and has already been working with the Government on the impact to airlines and calling for financial assistance as soon as possible.

"It will be vital for the recovery of the tourism industry to ensure airline links are both maintained and restored as soon as the threat of Covid-19 is dissipated," said Tighe-Umbers.

Airline crew are exempt from the 14-day self-isolation rule but are required to be isolated to their accommodation while waiting to operate their return flights out of the country.

E tū is preparing for unprecedented disruption for thousands of workers in the aviation industry.

Savage, the union's head of aviation, said the PM's announcement yesterday will test aviation workers like never before as the whole industry scales back its operations in response.

E tū is New Zealand's largest aviation union with close to 8000 members.

''We have implemented a comprehensive plan to ensure union members and their workplace leaders are supported and can get the information they need. We have already been involved in talks and negotiations with multiple employers.''

That work will escalate in the weeks ahead as employers begin consulting employees about what the shutdowns mean in their sector.

"It is not just international flying. The flow-on effects into domestic and regional networks will be huge. Thousands of workers and their families will be affected as cabin crew, caterers, aviation security, customs, airport workers, engineers, ground handlers, refuellers, and cargo workers see a massive drop off in work.''

Savage said the bigger issue facing crew was the cancellation of flights.

"There will be many cabin crew on the ground without work and how manageable that is for the airline will depend on how well prepared they are and how big their cash reserves are," he said.

"The Government's response is vital as workers need pay to survive and the industry cannot afford to lose the skilled people they have, as flights could resume again by the end of the month."

Auckland Airport said it was working fast to support the new border restrictions.

"We support the Government in its efforts to safeguard the health of New Zealanders and reduce the threat of transmission of Covid-19," said Adrian Littlewood, Auckland Airport's chief executive.

"We work with 30 airlines from across the world and we are in close contact with those airlines, helping them to understand the new border restrictions and what they will mean for travellers and their flight and cargo services.

"Like the Government, we are hopeful that these decisions will help to minimise the impact of Covid-19 on New Zealand in the long-term. But in the short term we have a very hard road ahead."