Air New Zealand running out of cash for refunds
Air New Zealand has revealed that the airline is losing around "$5 million a day at the moment" as the airline's Chief Executive outlined that the flag carrier is struggling to have enough liquidity in the bank to issue flight cancellation refunds to its passengers.
As air travel begins to resume, the majority of Air New Zealand operations have been in the form of repatriation and cargo operations in addition to the new air corridor between Australia and New Zealand. Now, in an interview with RNZ, the airline's Chief Executive, Greg Foran outlined that due to the reduction in international flights to other countries the airline is running out of cash to pay for passenger refunds. The carrier has already made around 4000 employees redundant in an effort to save costs and Greg Foran was eager to point out that making more people redundant "would be the last piece of action" he would like to take.
Like many airlines around the world, Air New Zealand has been able to reduce expenses by using the government's wage subsidy scheme. This has allowed the airline to keep staff in employment. The airline said that it still needs to cut NZD150 million more off its wage bill. The airline's Chief Executive declined to comment on whether there would be more job cuts at the flag carrier. He outlined in the interview that the airline was working with trade unions to find a solution, but preferred to save money "using other tactics." Some tactics he eluded to include "reduced hours, some leave without pay, those sort of things, that would be much more preferable." He added that all areas of staffing were up for review, including airport staff, cabin crew, pilots, engineering, maintenance, and home office.
The airline CEO said that before the COVID-19 pandemic, Air New Zealand had cash of NZD1.1 billion, but this now stands at around NZD650 million. He stated that between the backend of February through to April the airline has "burnt through the best part of $500 million." Air New Zealand has acquired a NZD900 million loan off the New Zealand government and Greg Foran mentioned that the airline "will need to access that sometime in the next few months." However, the airline's chief also mentioned that even with the loan and taking "all of those things into account, there will not be enough cash in the bank."
The airline is offering many passengers credit vouchers for the airline and Greg Foran thanked the customers who had chosen this option to support Air New Zealand. The Chief Executive said "the simple fact is that if we went and refunded all non-refundable tickets, we'd actually be in a situation where we could not afford to operate. So as much as I would like to be able to solve that, I can't. We've got a business that we've still got to operate, we've got staff to pay, we've got bills to pay." It is evident that the Chief Executive is encouraging all customer to opt for credit option saying that the airline has "tried to make it more palatable extend the use of it, let people pool it and use it for families."
The Air New Zealand Chief Executive stressed that the last 100 days had been full of more change and challenges than he had ever seen in his life. He however remains confident that Air New Zealand will resume international flights mentioning that the "United States is a really important market for New Zealand, and I'd like to be back flying into all those locations. None of those are off the table." He is also confident that Air New Zealand will be "a very, very competitive airline" when it resumes full operations in the coming months.
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