Coronavirus: Inside Air New Zealand's battle in the new dark age of travel

Airlines face a battle for survival as demand dries up. Photo / Mark Mitchell

What was a golden age of travel has quickly turned. It's a new dark age and airlines are the first to feel it.

Five years ago airlines from around the world were scrambling to fly here, now some are working out how they can leave in the scramble to stay afloat.

Air New Zealand is here for good, the country needs it to be, but has today announced it will slash international flying by 85 per cent in the coming months and lay off up to 30 per cent of staff. That's 3750 people and that move could be a long term one. New travel restrictions have largely shut off this country as a destination.

Other countries are doing the same and it is fast becoming a world where there will only be skeleton passenger services on key routes.

Freight, formerly the cream on top of passenger revenue, is taking on new importance as a money maker for airlines as cargo is exempt from bans applying to people.

Air New Zealand and unions spoke today about how to preserve as many jobs as possible among its 12,500 staff but warnings yesterday that it was going to be smaller soon have come to pass. Pilots were told revenue of $6 billion last year could shrink to $1b.

The airline's also been talking to the Government, which holds a 52 per cent stake and may well have to step in to underwrite capital raising to support it.

Air New Zealand planes parked up at Auckland International Airport. Photo / Dean Purcell.

The airline has $1 billion in cash and short term deposits but enormous costs. Its wage bill is $1.3b a year and in the six months to December 31 the airline had $1.38b revenue in advance - tickets it had sold up to a year in advance and now in many cases can't provide seats for.

Gearing is now at the top end of the target range of 45 per cent to 55 per cent and this is forecast by Forsyth Barr to reach around 75 per cent in this financial year.

''While we believe Air NZ may require additional capital to provide liquidity and protect its balance sheet, the Government's position as majority shareholder is helpful (we expect it would step in and underwrite a capital raise, if required), assuming politics don't get in the way of potential financial assistance,'' analyst Andy Bowley said.

That adds up to a lot of parked planes and savings on fuel - but more modest given it was locked in at prices for most of its expected use this year at prices above where it now sits.

It's not only long haul travel that's dried up. The airline is poised to take the axe to transtasman capacity - more details to come. It will continue services on all domestic routes but the capacity will be cut by a third as frequency drops.

Businesses are barring travel by staff, a key driver of revenue on domestic routes.

It's not because flying is unsafe. Basic hygiene and medical-type filters on planes make that so and Air New Zealand hasn't seen a spike in cabin crew or pilot sickness since the coronavirus issue emerged.

Staff haven't been spooked and the rescue flight to Wuhan in February attracted more volunteers than were needed, a sign the airline's consistently high staff engagement scores translate to the real world.

The relationship with four unions - covering about 70 per cent of staff - is as critical as it's ever been.

The signs so far are good, the airline and unions are talking frequently and the messaging from all is consistent; this is very bad and everyone is in this together.

New chief executive Greg Foran has no direct airline experience and can use this to his advantage.

He's got no pre-conceived views and he's got a fresh approach.

The airline's chair Dame Therese Walsh has deep Wellington connections but Foran is understood to have been working closely over the last fortnight with the head of the Department of Prime Minister and Cabinet, Brook Barrington.

He chose to cut his own pay by 15 per cent and, as part of cost-cutting presciently started last year, his executive team remains on a pay freeze. They're meeting daily - including weekends - at the airline's crisis centre on the fifth floor of its Fanshawe St headquarters.

Among the executive, pilot's boss David Morgan joined the airline in 1985, chief operating officer Jeff McDowall in 2000, revenue head Cam Wallace (2001) and marketing head Mike Tod, who joined not long after, have seen it all; the $880m collapse at the time of the 9/11 attacks, the airline's revival, Sars in 2003, the global financial crisis in 2008 and the Perpignan plane crash that year. They are being advised by the airline's chief doctor, Ben Johnston and network specialists.

At one of its airport buildings it has a Group Emergency Control Centre running. This is the arm of the airline that gets set up to manage the practical day-to-day mechanics in a crisis situation.

Staff are working out implications of foreign country travel restrictions on air crew - exempt from restrictions in this country, managing situations where passengers who are showing Covid-19 symptoms and liaising with Government agencies like Ministry of Health for tracing of passengers who may have been exposed to Covid-19.

The staff are also scenario planning for the event of potential border closures and how to get aircraft and people home.

Wreckage of an Air NZ plane that crashed off the coast of Perpignan. Photo / Supplied

This crisis is far different in breadth and duration but the same approach to crisis management is needed. Cool and calm.

In his final year of heading Walmart in the United States, Foran needed to fall back on his own crisis management training with two shootings - including being quickly on the scene at an El Paso store where 22 people were killed.

Despite the crisis facing the airline Foran has still been out on the frontline mixing with staff and customers and hasn't shelved a strategic review he got underway before the outbreak started to really bite.

Fortunately airlines are populated by optimists. They're in a battle for survival and every bit of positivity is going to be needed at Air New Zealand in this new dark age of travel.