Coronavirus: Anger and dismay at Air New Zealand plans to slash another 2000 jobs

Friday, 5 June 2020

When Greg Foran started at Air New Zealand as chief executive, Covid-19 was quickly becoming the most significant crisis the aviation industry has ever faced.

Air New Zealand may need to slash a further 2000 jobs as it responds to the Covid-19 crisis.

The airline has already made 4000 workers redundant, and expected its original workforce of 12,500 to halve.

In a letter sent to staff on Friday chief executive Greg Foran laid out a plan and timeline to get Air New Zealand back on its feet, which included removing around $150 million more from its wage bill starting on Friday, though it hoped to do much of it through leave without pay, reduced hours, job share, voluntary exits, with redundancies as the last option.

'We're stressing we really want to find a solution to this which does not involve making people redundant,' Foran told Stuff.

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But: “The costs we have taken out is 4000, which is effectively a third of the workforce. You’ve just heard me say we are going to be well under half,” he said.

“I was out at the airport on Monday talking to a number of our staff who were looking at whether of not they wanted to go down the furlough path, and for some of them they can afford to do that, and it suits them at this period of time,” Foran said.

Last week Air New Zealand said its initial labour reductions of 4000 staff was expected to drive savings of $350m to $400m a year.

“This business has gone from around $6 billion to a few hundred million,” he said. “Even next year it’s going to be well less than what we were flying.'

E tū union head of aviation Savage said staff were angered and dismayed at the news.

Air New Zealand chief executive Greg Foran says the airline is in survival mode.

“The company is heavily focused on saving money and is in danger of being blinded to the importance of treating both employees and customers with respect,” Savage said.

Staff had lost trust in senior management because of the way they were treated in the first round or redundancies, he said.

“The company is facing a big challenge, but now is not the time to repeat their past mistakes. To rebuild better, we need to keep these vital workers in jobs,” Savage said.

Many of those still with the airline had taken pay cuts, with Foran estimating his pay would be down by about 40 per cent this year.

'I’ve taken a 15 per cent wage cut, and as well as that, we’ve forgone anything in terms of short-term incentives, and obviously the long-term incentives isn’t going to pay up either.

“I think all up it’s probably a 40-plus per cent reduction in pay,” he said.

Foran, who joined the company in February, said over the next two years the airline would transition through a three-step plan to survive, revive and thrive.

The airline would not be changing its policy on issuing 'credits' instead of cash refunds to customers, Foran said.

'It’s just not affordable to open the floodgates on that.

“We can’t afford to pay out on all of those,” he said.

“It’s painful, difficult, but it is the right thing for us to do.”

Many customers had written to him personally about the refunds, he said.

In about 2500 cases customers in hardship had been given their money back. Foran said Air NZ would not publish its hardship criteria as it approached each request on a case-by-case bais.

The survive, revive, thrive plan would take it through to its annual results announcement in late August 2022, which is in about 800 days.

That was the target date for Air New Zealand to report healthy profits again even though it may be 70 per cent of its pre-Covid-19 size, he said.

At that point Air New Zealand could be flying about 13 million customers a year versus almost 18 million pre-Covid-19, he said.

'The good news is that Air New Zealand could be more profitable in the future than before.'

The airline was currently in the 'survive' phase which it would be in until the end of August and involved 'radically overhauling' its costs, he said.

'From grounding our [Boeing] 777 fleet to deferring expenditure on new aircraft, hangars and parking; seeking savings across contracts in our supply chain and leases for aircraft; Executive roles, office space and even company vehicles. We are leaving no stone unturned.'

In September it planned to enter the revive phase, by which stage it hoped New Zealand would have well and truly have returned to alert level 1 and that Tasman and Pacific Island flying could be returning for leisure and business travellers.

However, it was not factoring a return to long-haul flying of any note until 2021, Foran said.

'We believe that until there is a vaccine, effective treatment or elimination of the disease in key markets, the New Zealand Government will not fully open its borders for growth in long-haul air travel.'

It would use the revive phase to develop new products and services and digital would be at the core of everything it did, he said.

Air New Zealand carried just 15,000 passengers in April.

By August 2022 when it entered the thrive phase it would be a digital company with a sustainable focus, he said.

Its domestic jet and regional operations were highly efficient and needed to be for its business customers.

The Tasman and Pacific Islands offered the best value option for all customers while international would be targeted at business and premium leisure customers, he said.

The Covid-19 pandemic has had a huge impact on Air New Zealand, and sparked much debate about its future, and whether the Government would take a larger stake in it.

In late March the national carrier grounded more than half of its fleet and reduced its network capacity by 95 per cent in response to governments shutting their borders to stop the spread of Covid-19 and customer demand away falling.

In late May, Air New Zealand announced 3700 redundancies, and at the time had not drawn down on the huge $900 million support loan provided by the Government.

In a live chat with travel agents in May, Wallace said the airline aim was to retain as many employees as possible and it had shifted its focus to being a domestic airline in the short term.

Foran in March said the airline could be at least 30 per cent smaller in a year's time, resulting in about 3750 job losses.

Annual revenue was expected to fall by 90 per cent from $5.8 billion to under $500 million as a result of Covid-19, he said at the time.

It began increasing its domestic capacity in mid-May when the country moved into alert level 2.