Billions needed for Air NZ bailout, say experts

‘‘There’s just going to have to be some really, really significant support in there just to keep Air New Zealand ticking over.’’ Irene King

Former chief executive of the Aviation Industry Association

The Government may need to spend as much as $3 billion on an Air New Zealand bailout in order to stop the airline from going under due to the impact the coronavirus outbreak is having on the company, an aviation commentator says.

Air New Zealand shares were placed in a trading halt on Monday to allow time for the airline to assess the impact of the Government’s new travel restrictions designed to stop the spread of Covid-19. Yesterday the trading halt was extended either until an announcement was made by the company or until the sharemarket open at 10am tomorrow.

The airline was left out of a $600 million stimulus offered to the aviation sector to help cope with fallout from the outbreak.

Transport Minister Phil Twyford said an announcement on Air New Zealand was likely by the end of the week.

‘‘We need the national carrier to play a critical role over the next few months and for a year or more helping us get through the economic disruption,’’ he said.

Air New Zealand chief executive Greg Foran said on Monday that, based on forecasts, the airline’s 12,500 workforce could reduce by up to 30 per cent, which equates to about 3750 jobs.

Irene King, a former chief executive of the Aviation Industry Association and now an independent aviation commentator, said the Government may need to throw between $2b and $3b at Air New Zealand in order for it to stay afloat. ‘‘It’s billions of dollars we’re talking.’’

A bailout would need to include wage subsidies because Air New Zealand could not afford mass layoffs due to the costly redundancy clauses in many workers’ contracts, she said.

Mothballing planes was also an expensive exercise, as was reopening routes and returning planes to service, she said.

‘‘There’s just going to have to be some really, really significant support in there just to keep Air New Zealand ticking over.’’

UBS aviation analyst Marcus Curly said it was forecasting Air New Zealand to be burning $211m a month from the start of April.

A stimulus would need to be large enough for the airline to remain solvent for long enough to ‘‘come out the other side’’ of the crisis, he said.