Focus Live: The Government is handing Air New Zealand a $900 million lifeline as it copes with the coronavirus fallout.
This is much different from the last time the Government stepped in to rescue Air New Zealand.
Back in 2001, the airline was done in by an unfortunate expansion into Australia, unloved and finally pushed to the wall by the 9/11 terror attacks. Other airlines failed then but not onthe mass scale that we are about to witness now as the air-transport system grinds to a virtual halt as a result of the coronavirus.
As coronavirus hit, Air New Zealand was heading the same way in spite of being highly profitable, well run and widely admired. Airlines always plan for disease outbreaks but none could have foreseen the breadth and scale of this one.
Finance Minister Grant Robertson explained that funding options for the airlines had run out. Private banks could not help so the taxpayer must, again.
It was too important to fail back in 2001 - when it got an $885 million bailout - and it's even more important now. It will not only be critical in shipping freight and carrying essential personnel to New Zealand; it will do the same domestically to help battle Covid-19.
This morning it was announced it could draw on a $900m loan in two tranches and when asked whether it may need more the minister didn't rule that out. It seems the will to support the airline, no matter the cost is a bottom line.
"We need a national carrier at a time like this and in the future," Robertson said.
"We had a company that was well run and well-governed but an amazing outside event occurred to it."
Asked again whether it was too big to fail he re-iterated: "We must have a national carrier."
It also wants to protect its 52 per cent investment, which before the announcement had halved in value since the beginning of the year.
The airline will prove its value immediately with involvement in repatriation flights and some of its cabin crew, who have first aid or medical training and will become part of health teams confronting the coronavirus. Staff deal with difficult situations at 35,000 feet, but this will be their biggest challenge.
The airline is also expert at tracing passengers and this will be needed to track Covid-19 contacts.
In the longer term, the airline, with government support, could spring back faster than its rivals and come back stronger. The problem is nobody knows how long it will be before this virus is properly understood, efficiently treatable and, to really restore confidence, preventable with a vaccine.
Robertson says the airline will be left to run its own business but it has made commitments to routes - a thin skeleton service internationally to keep trade routes alive and domestic connectivity. But the Government will be working even closer, especially if loans are converted to equity.
Interest rates on those loans are an eyebrow-raising 7 per cent to 9 per cent but the airline had no choice.
Other airlines are pulling out of this country as border closures kick in. Whether they come back is to be seen. If the Government does find itself with a bigger stake of the national carrier, it may become even more interested in which airlines it allows to come back in the interests of protecting its bigger investment.
New chief executive Greg Foran was meeting unions today over redundancies which could see a third of the 12,500 staff laid off. The Government backstop will help shore up the future of those remaining but the question remains - how long will the airline have to weather this storm?
