Air New Zealand’s CEO says New Zealand may need to get used to living with Covid-19 if its current elimination strategy doesn’t work, predicting the airline industry won’t recover from the pandemic for several years.
Greg Foran told TVNZ1’s Q+A this morning the national carrier supports the Government's elimination strategy and is doing "everything that we can" to help.
“As I see it playing out, it is clearly a very, very difficult virus to control,” he says.
“Whether or not you’re talking about the situation we find ourselves in with clusters cropping up or when we head down the path where we’re starting to see people infected again, it may be that we end up in a situation here where trying to eliminate it completely actually becomes almost impossible.”
If the latter were to happen, Mr Foran says the country may need to “very, very carefully” learn how to manage and live with the virus.
He also predicts it would take years for the airline industry to return “to some degree of normal flying activity”.
However, he cautions that because of the virus’ characteristics, it was hard to predict how things would turn out.
Just a few weeks ago, Mr Foran was feeling “reasonably buoyant” about travel to the Cook Islands and Australia.
“At some point, I’m confident that we will get solutions to this, you know, vaccines will get developed. But of course, whether everyone takes them and how effective they are and the ability to get them distributed is all yet to be solved,” he says.
But until then, Mr Foran says businesses, including Air New Zealand, needed to maintain a high degree of flexibility.
It comes after the airline announced an $87 million loss for the 2020 financial year, its first loss in 18 years.
The loss is a stark contrast to the year prior, when the national airline posted earnings of $387 million, and highlights the Covid-19 pandemic's severe impact on its operations.
Covid-related travel restrictions resulted in a 74 per cent drop in passenger revenue from April to the end of June compared to the prior year, which drove the airline’s operating losses.
The results come despite Air New Zealand seeing a strong interim profit of $198 million reported for the first six months of the financial year.
COMPULSORY FACE COVERINGS ON PLANS
As per the Government’s announcement last week, face coverings will be made mandatory on some forms of public transport for those over the age of 12 from tomorrow, including on planes.
Mr Foran says he's “absolutely” confident the airline was ready for the changes to keep passengers, staff and crew safe, adding crews had been using PPE since March.
“We’re well-rehearsed in what we have to do.”
He says there were other safety precautions in place as well, such as social distancing on planes.
Earlier this month, Health Minister Chris Hipkins met with the airline to discuss growing concerns over the Covid-19 arrangements for airline crews.
The minister says he’s not 100 per cent convinced the protocols are as tight as they could be.
According to Mr Hipkins, flight staff stopping in another country have been required to self isolate for 48 hours upon returning to New Zealand.
Crew are then tested for Covid-19 at the end of the two-day period before they are allowed back in the community, he said.
He said he would be issuing an order as Health Minister that would specify for the public what protocols air crews must follow.
"The rules are very clear for those who are following them at the moment but to avoid any public confusion about that I will issue another [order]."
Breakfast host John Campbell challenged Greg Foran on why workers didn’t have to quarantine on arrival in NZ in some cases.
Mr Foran told TVNZ1's Breakfast earlier this month: "No system is completely watertight but you can certainly put in place lots of mitigating circumstances that can reduce the risk.
"And I think the results that we're seeing out of Air New Zealand in the last few months - we haven't had a Covid case since April - indicates things are going well."
NO FURTHER JOB CUTS AT AIR NEW ZEALAND IN THE IMMEDIATE FUTURE
When asked whether the 4000 figure of job losses at Air New Zealand may grow, Mr Foran said there weren’t any more job cuts to come in the near future.
However, because of the unpredictability of Covid-19, the company needed to deal with what was immediately in front of it, he says.
He couldn’t rule out job cuts in the distant future, “but at this point, there are no immediate plans for anything else”.
'DEEP' DISCUSSIONS WITH GOVERNMENT OVER FUNDING
In March, the Government announced a loan agreement of up to $900 million over the next 24 months with Air New Zealand. The loan would be repaid at a commercial rate of seven to nine per cent.
1 NEWS report Katie Bradford explains the 24-month loan of up to $900 million.
Mr Foran says Air New Zealand is beginning to use some of that money, planning to borrow in installments to keep the interest repayments low.
He says there are continued discussions with the Government about the airline’s capital structure , which is how a company funded its operations and growth through a combination of debt and shareholders’ equity.
It was important for Air New Zealand going forward to determine a capital structure that worked, he says.
Mr Foran also signalled he wanted to increase the company’s investment in digital initiatives to improve business efficiency and the customers’ experience.
Future decisions on how much more of the loan would be taken out would depend on Air New Zealand’s long-term capital structure, Mr Foran said.
“[There are] no decisions at this point”, he said, with “deep” discussions continuing.
He said the Government wanted to maintain its position as a majority shareholder in the company. It currently holds 52 per cent.
“In terms of how that plays out, that will be part of the discussions that we're having at the moment. So, we just have to wait and see.”
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