Air New Zealand will be able to keep flying its essential routes thanks to funding support by the Government of up to almost $1 billion.
The rescue package announced today is a loan agreement of up to $900 million over the next 24 months, Finance Minister Grant Robertson says.
It will be repaid at a commercial rate of 7 to 9 per cent.
"Without this intervention, New Zealand was at risk of not having a national airline," he says, adding that Air New Zealand has a "unique and critical role in our economy and society".
"This agreement means that Air New Zealand is in a position to play its part in making sure Kiwis can return home from overseas and that essential flights and freight lines for goods like pharmaceuticals remain open by ensuring flights continue to and from key international destinations.
"The agreement also safeguards the domestic network, with flights assured to all current destinations."
Air New Zealand is 52 per cent owned by the Government and is expected to return an annual dividend. That's been suspended for this year and the future, Mr Robertson says.
Last week Air New Zealand slashed its international capacity by 85 per cent and its domestic by 30 per cent, in response to difficulties caused by the global coronavirus pandemic.
In a statement today, Air New Zealand said it's "greatly appreciative" of the Government's support.
"The Government and Treasury moved swiftly to ensure that Air New Zealand had financial certainty as demand for flights domestically and internationally has rapidly fallen due to travel restrictions implemented by countries around the world," chairman Dame Therese Walsh says.
"The loan facility ensures that Air New Zealand can continue to play a vital role in connecting New Zealanders and our businesses with each other here at home and around the world."
Air New Zealand previously indicated up to 30 per cent of staff would lose their jobs as well.
That's still going to happen, Mr Robertson says.
"While today's action means the company can continue to operate, given the unprecedented shock to the global aviation industry caused by Covid-19, Air New Zealand has advised that there will unfortunately be job losses as capacity is cut.
"No one can be sure what the immediate or medium term future of the aviation sector is. We will be working closely with the company to ensure we do the very best by those staff."
Separate to the loan agreement, Air New Zealand and the Government are also working together on repatriating Kiwis stuck overseas as routes shut down, as well as maintaining critical cargo transport lines and having Air New Zealand staff assist the health response.
Mr Robertson says this will be negotiated on an "arms' length basis" between the airline and Government, under traditional commercial agreements.