Air New Zealand has been rocked back into ”survive” mode by the latest lockdown, but is upbeat about prospects for extensive international flying next year.
Its delayed first Auckland-New York flight could be just months away and the airline’s chief executive, Greg Foran, says it is poised to resume passenger services to a wide range of destinations, depending on New Zealand border settings.
Foran told the Herald the rest of the world was opening up and he was optimistic that existing North American destinations, Australia and some parts of Asia would be within reach next year for Air NZ travellers – provided they were fully vaccinated.
He said a project team was now back working on the flagship New York route, an 18-hour flight that was meant to launch late last year into Newark. And itmay not be too far off.
“At a bit of a guess – I’d like to think around the middle or late next year. We know we can do it, we’ve got the plane to do it and we’re getting the airport ready.”
Foran says Air New Zealand had maintained a strong presence into the United States due to cargo flights and this would help the restart.
It was flying 50 freight flights a week and into the US it continued fly daily to Los Angeles and three days a week into San Francisco. Houston and Chicago would be relatively easy re-starts as would Vancouver. Hawaii would also be popular with Kiwis.
Air NZ was flying four times a week to Shanghai and Foran said he was keen to get that up to daily with passengers, as long as Chinese citizens could travel, and there was no guarantee of that next year. Re-establishing quarantine-free transtasman and Pacific Islands travel was also a priority.
“We know where we want to go – we’re ready to go.”
The airline was also simplifying its fleet. It has retired its Boeing 777-200s, and had the option of bringing back its 777-300s if demand suddenly spiked, but it was quite possible the only aircraft it would use were 787 Dreamliners.
Two new 787-9s were due for delivery at the end of 2023. The airline had the option of switching the entire next tranche of Dreamliners to 787-9s, rather than the eight larger 787-10s it announced in 2019.
Foran said Dreamliners coming into the fleet would have the much anticipated new business class and premium economy layout. This would be retrofitted progressively into the 14 Dreamliners already in the fleet over several years.
Covid has helped accelerate the simplification of the business across its international and domestic fleets.
“A number of years ago we were a business that was running eight types of planes with 10 different engine types. When we come out the other side of this there will be four types of planes and six engine types.”
Back to square one for now
The airline had enjoyed its best ever July for domestic bookings and while the transtasman quarantine-free bubble operated for nearly three months it was building back to 75 per cent of pre-Covid loads. Meanwhile, the Cook Islands – for a few months a Pacific destination for sunseekers – was enjoying performance up by more than 200 per cent on pre-pandemic levels.
But the prolonged lockdown in Auckland and restrictions in other parts of the country had badly hit the domestic operation and all international travellers must go through MIQ, effectively shutting off leisure travel.
Last June Air New Zealand had mapped an 800-day “Survive, Revive and Thrive” strategy.It had transitioned to the Revive phase earlier this year.
“We were absolutely in Revive – but once you’ve gone into lockdown and now the best part of 50 days in Auckland, our hub for two-thirds of our domestic network, the reality is we’re in Survive.”
In a market update last month, it added up the cost of the pause.
The monthly cost of restrictions at alert levels 3 and 4 was estimated at between $45 million and $55m, it said.
If restrictions in Auckland remained at level 3 or 4 while the rest of the country was operating at level 1 or 2, the cost would be between $25m and $35m.
The loss of the transtasman travel bubble was worth about $20m to $25m per month, and the airline is tapping further into the Government’s $1.5 billion standby loan.
But with the benefit of seeing how strong the appetite for post-lockdown travel has been in the past, Foran is confident it will bounce back quickly again.
In the meantime, Air New Zealand is looking closely at how to optimise the routes it can fly, with Wellington-Kerikeri being an example of this. He said it was possible this could become permanent and other links between towns were being examined.There were no plans to cut staff.
“Clearly, if I thought that New Zealand domestic was going to be locked down for more than six months, then I would probably take some action. But I don’t think that we are.”
Furlough wasn’t an option in this country. “If you’re going to lay people off, you need to make them redundant, that generally is a six-month cost so if you think that you’re going to be back up and running before that time, it doesn’t make a lot of sense.”
Navigating a GSM
Travel uncertainty prevented Foran from being at the airline industry’s main event this week – the International Air Transport Association’s annual meeting, this year being held in Boston after it was forced online last year.
He’s been talking to other airline bosses and closely following the event, which is hearing about a patchy but increasingly strong recovery.
While airlines are heading for collective losses of $US60b ($87b), this is well down on last year’s $137b, when some carriers grounded their entire fleets for weeks.
Some parts of the world are coming back strongly. The United States’ domestic market suffered a Delta variant shock over summer but is now recovering, intra-Europe and Britain is strong, Latin America was nearly back to pre-Covid services as was Africa, although demand was week.
Foran said southeast Asia, which included New Zealand, was lagging, although Qantas in Australia was ready to fly out of the blocks next month.
The IATA meeting has heard of haphazard approaches to vaccine requirements, quarantines and testing for Covid threatening longer term recovery.
Research shared there showed that for a seven-month period in Britain, PCR testing for Covid showed that people in the community where the virus was circulating were seven times more likely to test positive than those coming off planes, which showed how effectively airlines can manage it.
“If Covid is in the community the way it is now in almost every country, including New Zealand, you have more chance of catching it in the community than you do from having passengers cross your border,” Foran says.
In an industry thick with them, Foran avoids acronyms. But he’s got a good one to describe the current state of play for airlines: a GSM – that’s a ”Gooey, Sticky Mess”.
“It happens in lots of industries and businesses, particularly when you’re dealing with change, even more so when you’re dealing with a crisis and that is you’ve got different settings in different countries at the moment, but there is a theme emerging. And it’s a theme that says if you’ve been vaccinated you’re free to go.”
He said he had overwhelmingly positive support for the airline’s policy to introduce a “no jab-no fly policy” for international flying next year.
“It’s going to be really hard to get into countries unless you’re vaccinated and a whole bunch of others are starting to think about this. Qantas has made a move and others are considering what to do.”
Air New Zealand had discussed its vaccine requirement announcement with the Government, which shortly afterwards set out its requirement for all non-NZ citizens travelling here to be fully vaccinated from November 1.
His staff had been very supportive of the policy for flights and the company’s requirement for thousands more of its workers to be vaccinated with only about 10 exceptions. The airline would discuss other possible roles for them.
Foran said the airline was carefully considering whether to extend its passenger vaccine requirement to domestic flights, but this was complicated as its flights were often the only ones to many destinations.
Vaccination was the key to recovery.
“I think 2022 is still going to be challenging but I can see at a point whereCovid is here, it’s endemic, we’re controlling it from a health perspective, people are getting the booster shot.”
International travel would go like this: “I’ve got my passport, and I’ve got my Covid passport – get on with it.”
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