Air New Zealand will send its Boeing 777-200s to long-term storage in Australia. Photo / Brett Phibbs
New Zealand risks being left behind as air travel slowly comes back to life around the world, says a newly formed aviation sector group.
Before Covid-19, the airline industry supported an estimated 11.2 per cent of gross domestic product in this country. But now, the chairman of the NZ Aviation Coalition, Justin Tighe-Umbers, says some airlines may not return if there is no clear pathway to a restart of long-haul international services.
The transtasman and Pacific travel bubbles offered some hope, sometime in the future, of breathing life into airlines which are "on their knees", but it would take the managed, safe resumption of long-haul services to get the industry cranking at anywhere near levels it was at before the pandemic.
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Links through the big hubs and into Europe or direct to North America were worth hundreds of millions of dollars each to the economy but these had been effectively wiped out by border shutdowns and quarantine requirements.
The 48 international destinations served out of New Zealand had plunged to about eight, but around the world airlines were taking tentative steps to resume flights. Europe had started reopening this week and capacity around the globe had grown from about 5 per cent of normal to about 40 per cent now.
"The danger here for New Zealanders is that we could get left behind and not see these connections [return] and that'll really hurt us economically," said Tighe-Umbers.
The industry was bleeding cash and by one estimate 40 per cent of airlines could fail. He said this would make airline survivors very picky about where they resume flying to.
"This is the worst crisis airlines have ever seen, cashflow liquidity is a massive problem. You're going to start to see a number of airlines shut up shop, and then the ones that are still maintaining operations are going to be very selective."
In a new report, the International Civil Aviation Organisation says airlines could lose about $600 billion in revenue this year.
Airlines would go to the big catchment areas to fill aircraft, said Tighe-Umbers. "And that's where the northern hemisphere can very easily become the focal point, whereas down here we will lose the connection so we're going to do everything we can to avoid that."
Air travel didn't cause Covid-19 but has transported around the world it with deadly efficiency. Tighe-Umbers says it will take a concerted industry effort to overcome public nervousness over opening up New Zealand and flying to other places.
The sharp public backlash to the case of the two women who tested positive for Covid-19 after a quarantine blunder and increased uncertainty over the timing of the transtasman bubble illustrated the size of the challenge.
Around the world, people are less willing to fly now than they were at the height of the coronavirus lockdown, according to research carried out for the International Air Transport Association.
Only 45 per cent of those polled in late May and early June said they'd be prepared to board a plane within one or two months of restrictions being lifted, down from 60 per cent in April.
"That's certainly one thing the whole industry is going to have to work together to make sure that we do rebuild that confidence in travellers, because it's taken a hit in general.
"I'm sure we all still know Kiwis are abroad trying to get into New Zealand at the moment and there's one thing that the system needs - it's that confidence that you'll be able to get there, and get back."
The controversy in this country over Air New Zealand's refund policies had exacerbated anxiety over flights.
"It's hard to imagine a tougher operating environment for airlines at the moment and many of them are on their knees and cashflow is a huge problem, so it's incredibly frustrating for travellers when they've spent a lot of money, been saving up for a holiday, and then find they can't get that money back," said Tighe-Umbers.
"There's no easy answer on this one for airlines, but certainly I think they'll be conscious that there's work to be done to build that traveller confidence."
All parts of the travel system including airlines, hotels and insurance would have to work together to come up with products that would help spread the risk in such an uncertain environment.
He said New Zealand needed to work on a risk-based business case approach to reopening its borders, but as Prime Minister Jacinda Ardern has warned, there would inevitably be more cases of Covid-19 coming into this country.
The country would have to do more work on advance visas, possible temperature checking or blood tests, and cleaning and other hygiene measures on planes and airports that reduce the likelihood of Covid-19 getting into New Zealand
"And then if a few cases do come, what capabilities do we have as a country: the contact tracing - do we need a contact tracing app and is our testing widespread enough in New Zealand," said Tighe-Umbers.
Flying would be a different experience when borders opened, although how different would depend on the destination.
Travelling to Australia might not be much different to the way it was, but going to countries where Covid-19 is more prevalent could mean being part of an international database or having a health passport.
Re-opening the country was a multibillion-dollar challenge, said Tighe-Umbers.
"It's more than the economy as well actually, if you think of how many immigrants live in New Zealand. This is about people being able to see their families and get back and being able to do that, and then business folk going overseas as well."
The Government's $600 million aviation package had helped vulnerable parts of the system make it through the depths of lockdown.
''When you've got a situation where 95 per cent of your international flights have dried up, what you don't want to lose is critical parts of the whole aviation infrastructure."
Cargo had become the mainstay of long-haul flights and government subsidies had been crucial in keeping about a dozen airlines flying here.
He said the Government could help encourage airlines to return by dropping border charges and other fees.
''In the near term, as part of the recovery plan, air navigation, border agency charges, those things that have been paid for end up on the ticket price. You're going to need government support to get people in the country spending, take the GST that can fund [such services] and then grow ourselves back.''
The NZ Aviation Coalition is comprised of Tighe-Umbers' organisation, the Board of Airline Representatives (Barnz), NZ Airports, four of the biggest airport companies and some airlines and was set up to provide a single voice for the sector when dealing with the Government.
Given that Barnz and the airlines are often at loggerheads with the airports over pricing, the grouping is a significant sign that both sides have found themselves in the same boat.
"Airports and the airlines can have differing opinions in the past around commercial pricing settings so that was seen a really big signal that we were prepared to work together as a sector, and a New Zealand Inc. mindset.
"It was recognised early on, recovery after this was going be a lot tougher than what you saw off the back of September 11, or Sars, or the GFC. We recognised you need to have a single voice through the Government."
The sector got some advance warning as the impact of coronavirus worsened in Wuhan but the impact on aviation accelerated quickly throughout February.
The United States ban on flights from Europe on March 12 was a watershed moment and New Zealand's move to do the same a week later - with just a few hours' warning - changed the landscape completely.
"For Barnz that was about getting in touch with 28 airlines, many of whom had flights in the air that were going to be affected. My phone just about melted in the process in terms of stepping through the detail of literally the logistics of it all."