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‘Not enough cash in the bank’ for refunds – Air NZ boss

Jun 06, 2020
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Air New Zealand is losing $5 million a day and is bracing for potentially more job losses saying it needs to slash $150 million more from its wage bill.

The national carrier has already ditched 4000 jobs, and some employees have taken a 30 percent pay cut.

The company has had more than $70 million from the government wage subsidy scheme but said it would need to rely on the second round of subsidies for millions more.

Last April it carried 1.4 million passengers. This April the number was just 15,000.

Chief executive Greg Foran told RNZ’s Checkpoint all areas of staffing were up for review, including airport staff, cabin crew, pilots, engineering, maintenance, and home office.

“We burn through cash at about five million [dollars] a day at the moment.

“Our cash when we began dealing with Covid-19 was sitting at about $1.1 billion. We announced to the market a couple of weeks ago that that was now down to $650 or so. So you can see that we’ve been through the best part of $500 million through the back end of February, March and April and some of May.

“So you can assume the government loan that we’re able to secure, we’ll need to access that some time in the next few months.

“If international borders don’t open for some time – putting Australia and the Pacific Islands aside – we will have to consider what other options do we take.

The company would definitely have to dip into the government loan of $900 million before the end of 2020, he said.

“Some time in the next few months we’ll begin to access that loan and part of the action that we’re taking at the moment, whether it be in terms of finding another $150 million, plus some more capital, plus or more [operating expenditure], the way we’re dealing with customer credits at the moment.

“This is all about us creating a platform that ensures that this airline gets through this.”

Air New Zealand chief executive Greg Foran. Photo- Supplied : Air NZ : Bruce Jarvis

Air New Zealand would “certainly” be claiming the next round of the government’s wage subsidy, he said.

“I think for Air New Zealand that is about $37 million. We got $79 million in the first round.”

Foran said he was keen to see direct flights to New York and Chicago in the future, but he did not know when that would be possible.

“I’m no wiser in terms of when we’ll be able to fly to the United States than many people and our assumptions are at this stage that’s likely to be more towards the end of next year,” Foran said.

“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.”

The last 100 days had been full of more change and challenges than he had ever seen in his life, Foran said.

Cutting more jobs would be “the last piece of action” he would want to take, but he could not rule it out.

“Redundancy is not something that we would like to have happen this time … we’ve taken some action already and 4000 Air New Zealanders have left.

“This next phase is just about helping us get through this dip that we’re going to experience before international [travel] comes back online.

“If we can work through with reduced hours, some leave without pay, those sort of things, that would be much more preferable to us.

“It’s hard to work out exactly when the borders reopen and when we want people back, but we do want them back. So we just trying to deal with this dip in revenue, which has gone on a bit longer than we predicted when we first did our forecast back in March and April.”

Passengers sitting at a distance from each other on an Air New Zealand flight from Christchurch to Queenstown on 14 May,Photo: RNZ / Nathan McKinnon

The airline wants to save $150 million from its wages bill. Foran said airline management was talking to the unions about how to keep workers, or get them back full-time in the future.

“We’ve taken action in terms of capital and operating expenses, real estate, supply chain, executives have been impacted. We’ve made changes there, there’s been pay cuts. So, all parts of the business.”

“We want to have a really great airline [by August 2022] Foran told Checkpoint.

“We think hopefully revenues around $4 billion plus, we’ll be moving less customers we think, maybe about 13 million customers. And we want the airline absolutely in the black, profitable and innovating with customer product, and creating the right environment for all our staff.

“Air New Zealand is going to be a very, very competitive airline.”

‘Not enough cash in the bank’ for refunds
The airline is also taking a hammering from many customers unhappy that they are being offered credits instead of refunds.

Its chief revenue officer Cam Wallace told Checkpoint on Wednesday the airline simply did not have the financial reserves to refund everyone.

Foran restated that position tonight.

“Simple facts are that if we went and refunded all non-refundable tickets, we’d actually be in a situation where we could not afford to operate,” Foran told Checkpoint.

“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.

“We’ve got a loan that we will draw down, and even when I take all of those things into account, there will not be enough cash in the bank should we go and refund non-refundable tickets.”

Foran said the issues around cancelled flights, complications around credits and lack of refunds are “incredibly frustrating” for customers, and he empathised with them.

“The simple facts are that if we went and refunded all non-refundable tickets, we’d actually be in a situation where we could not afford to operate.

“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. We’ve got a loan that we will draw down and even when I take all of those things into account, there will not enough cash in the bank should we go and refund non-refundable tickets.

“So the credit is a good option. We’ve tried to make that more palatable, extend the use of it. Let people pool it, use it on a family basis – that’s a change that we’ve just put in place today.

“I know our call centres have been under pressure, we’ve been working to reduce those call times.

“If anyone’s got any real issues, please be patient, we’re going to get to you, and we will help you.”

Having customers’ cancelled flight refunds as credits certainly helped support the airline, Foran said.

“And there are over 2500 cases where on compassionate grounds we will refund tickets that are non-refundable, because we want to try and do what we can for our customers.”

Source: rnz.co.nz Republished by arrangement.

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