International flying is winding down around the world. Photo / AP
International flying is winding down around the world. Photo / AP
Airlines and other aviation operators want government charges suspended to help them survive the coronavirus crisis, as Air New Zealand is deep in talks about its future funding.
The call comes ahead of tomorrow's release of details of a $600 million Government aviation aid package, part of the wider $12.1billion economic support package unveiled this week.
Airlines, including Air New Zealand, are battling to survive while smaller general aviation companies are experiencing a plunge in bookings, especially those in the tourism sector.
Funding to support Air New Zealand is not part of tomorrow's announcement, but the airline is deep in talks with the Government (which owns 52 per cent) on a potential bailout as it bleeds cash and revenue dries up. One estimate this week suggests the revenue forecast of close to $6b this year could plummet to just $1b as international air travel winds down and domestic flights face being cut by half.
Forsyth Barr analyst Andy Bowley said the politics were sensitive, as was the board's obligation to satisfy the demands of minority private shareholders. But it was possible the Government could underwrite the issue of more shares on the secondary market to raise capital for the airline.
Although the circumstances were very different, the Government spent $885m bailing out the airline in 2001. Since then Air NZ has paid the Government $1.4b in dividends as the airline has prospered in a high growth environment.
Finance Minister Grant Robertson said today it was essential to have a strong national carrier, but as the shareholding minister could not discuss the form that support may take due to market rules.
Bowley said the airline was too important to the country to fail. Under a secondary market offer, the Government could guarantee to buy those shares not taken up.
The Government's majority ownership made it more attractive than many other airlines and when the crisis eased it could be in a strong position to bounce back quickly, compared to its rivals which may quit flying here for longer.
One investment banker said uncertainty over the duration of the crisis complicated capital raising, with little clarity over how much Air NZ may need.
Aviation
The banker said an option would be to raise up to $1b, but for half of the money to be a loan from the Government which could either be converted to equity if needed, or repaid if conditions improved in the next few months.
Around the world, airlines are pleading for government investment or at least relief from charges as they run out of cash.
Today the Australian Government announced a A$715m ($722.5m) relief package, in which it will waive fees including aviation fuel excise, air traffic control charges on domestic airline operations and domestic and regional aviation security charges.
Here, the Board of Airline Representatives wants no charges from border agency Airways, airports, or Civil Aviation Authority fees for the next six months.
Air NZ parking up planes around the country. Many will be stored in Christchurch. Photo / Brett Phibbs
The board's executive director Justin Tighe-Umbers said financial support was needed to immediately secure jobs of people providing services critical to the operation of the aviation network.
This includes aircrew, airport staff, ground handlers, cleaners, fuel handlers and caterers. Financial help was also sought for regional airlines as well.
"The scale of airline cuts made this week has never been seen before," said Tighe-Umbers.
"Airlines are in a fight for their lives. New Zealand needs to act fast to safeguard its air connections to the world, ready for when Covid-19 subsides and air travel picks up again.''
Aviation New Zealand has more than 300 members and many now face an uncertain future, said its chief executive John Nicholson.
Tourist operations rely on overseas visitors for about 80 per cent of their business, which will effectively end in the next few weeks as the last of them go home.
''For the next month it's looking very sick.''
He wants relief from government charges, some airport fees and more work from government departments such as DoC and Landcorp. Operators need to talk to leasing companies about some relief and funders about moving on to interest-only arrangements.
