Coronavirus: How the shockwaves spread through aviation's ecosystem

Qantas says it is grounding 150 of its planes. Photo / Supplied

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As airlines wind down international flying at increasing speed, the spread of coronavirus has exposed just how tightly connected the aviation ecosystem has become.

Airlines were on the front line of the health crisis that has quickly become an economic calamity for them, and now the wider shock wave is plain to see.

In a day of rapid change in aviation, the Government said it has begun allocating the first tranche of a $600 million aviation relief package.

Financial support will be made available to airlines to pay passenger-based government charges for the next six months, at a cost of $162m.

The Government will also spend $37m to cover Airways-related fees for the next six months.

Transport Minister Phil Twyford said that any fee rises or pricing reviews from agencies that charge fees at the border will be put on hold for 12 months.

These agencies include the Ministry for Primary Industries, Civil Aviation Authority, Aviation Security Service and Customs.

Finally, $70m worth of financial support will be made available to Airways, to cover plunging revenue. This is the organisation which makes flying possible.

There's no direct support for airlines, although Twyford is aware of the pain being felt by third-tier carriers.

And Air New Zealand and the Government are working on a far bigger and more complex funding deal as the airline's shares remain on a trading halt. Its chief executive Greg Foran has issued a rallying call to staff, acknowledging how stressful the situation is for them and warning that the airline which emerges from this crisis will look a lot different to the one he started work at just six weeks ago. Among other differences, it will have up to 3750 fewer workers.

Staff have been praised in a flood of social media messages, with Foran saying: ''take heart that we have New Zealand behind us, 4.8 million Kiwis helping us, wanting us, urging us to keep our heads up and look to the horizon.''

This is a much different airline to the one that needed a Government bailout in 2001 after its Australian expansion went badly wrong and 9/11 delivered the final blow. Air NZ today is well run, was financially highly successful and admired worldwide. This time it's the coronavirus that has dealt the blow.

The airline this week announced that it would run a skeleton international network of 15 per cent capacity but this could be impacted further by today's very clear ''do not travel'' warning from the Government. It will keep bringing Kiwis home, increasing capacity on some routes to do so.

Its domestic network - where 30 per cent cuts were envisaged at the start of the week - is likely to be cut even further. There could be half the number of seats available, although the airline has said it will maintain its current network. These cuts will see revenue shrink from $6 billion to as little as $1b.

Announcing the package in Queenstown, Twyford acknowledged the strain on airports and also the hundreds of businesses - retail outlets, freight companies - which surround them.

Transport Minister Phil Twyford. Photo / File

That's where the wage support part of the overall $12.1b economic rescue package will come in.

Auckland Airport, an infrastructure giant with a wide ''economic moat'' around it which has previously ridden through any aviation shock, has now been caught in the mayhem. Its share price has tumbled from over $9 at the start of the year to under $5 today. No matter how big their property portfolios and how long their rent rolls, airports struggle without planes.

Nobody knows when the aircraft will be back, and some overseas carriers may never return as the global travel industry is reshaped.

Rating agency Moody's Investors Services expects the coronavirus to ''significantly'' curtail global travel demand until at least June.

"The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets,'' the rating agency says.

"The passenger airline sector has been one of the sectors most significantly affected by the shock given its exposure to travel restrictions and sensitivity to consumer demand and sentiment."

Air New Zealand would have been celebrating its 80th year of flying this year, but this month canned a function to mark the anniversary.

Across the Tasman, Qantas would have been celebrating an even bigger milestone in November - 100 years of flying - but that seems a long way off.

The Qantas Group (which includes Jetstar) today said that from the end of this month it would suspend all international flights until at least the end of May and two-thirds of its workforce of 30,000 would be stood down to "preserve as many jobs as possible longer term".

"We're in a strong financial position right now, but our wages bill is more than $4b a year. With the huge drop in revenue we're facing, we have to make difficult decisions to guarantee the future of the national carrier,'' says chief executive Alan Joyce.

And that's what airlines that are bleeding cash have to do in their battle for survival. Shrink, lay off staff and hope this passes sooner rather than later.

It's the airlines that get the right balance between hunkering down, cutting but being ready for some sort of normality to return that will recover quickest and even prosper.

Foran says at some point dawn will emerge. ''In the meantime, it will take all our grit to navigate through this.''

Three hours in aviation

In around the same time as an Auckland-Sydney flight this happened today:

• Former Air New Zealand chief executive Rob Fyfe warns the airline would be bleeding about $450m a month to keep operating.
• Air New Zealand announces the closure of its London crew base of 130 later this month, eight months earlier than planned.
• Air NZ says it will suspend Auckland-Buenos Aires flights immediately.
• More than $200m in Government aid to keep aviation system operating and providing some fee relief for operators. Much more will be needed.
• Qantas, one of the world's oldest and most famous airlines, says it is suspending all international services at the end of the month.