Air New Zealand Grounds 777s, Defers A321neo Deliveries

Photo: Philip Pilosian /

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The crisis provoked by the coronavirus pandemic affects even the strongest. Air New Zealand is working through different ways to save cash and minimize costs.

The airline made a solid start to 2020 and right upon the beginning of the pandemic in March had short-term liquidity of more than $1 billion. On 25 May, 2020, the carrier said its short-term liquidity is approximately $640 million.

Additionally, after the closure of borders, Air New Zealand moved quickly to secure a loan facility of up to $900 million with the New Zealand Government. This amount has not been touched yet, thus the carrier is in a relatively strong position.

“We know that demand for air travel will eventually rebound, so we are cognisant of striking the right balance between removing cost from the business and ensuring the airline is in a strong position to ramp up as demand recovers,” said Jeff McDowall, Chief Financial Officer at Air New Zealand.

In order to preserve cash, the carrier has implemented a number of changes and introduced the following costs-saving measures:

  • Labour reductions of approximately 30%, or 4,000 employees, which is expected to drive annualised savings of $350 to $400 million
  • Suspension of all short-term incentive schemes for the 2020 financial year
  • Reduction of the Executive team by 30%
  • A 15% reduction in the salary of the Chief Executive and Executive team, together with a 15% reduction in Director fees through to December 2020
  • Institution of a hiring freeze and voluntary leave options
  • Deferral or cancellation of almost $700 million in expected capital expenditure to December 2022, including deferrals of planned A321neo deliveries

Also, among the additional measures is grounding of airline’s Boeing 777-200 and 777-300 fleet until at least the end of calendar 2020.

For the second half of the 2020 financial year, Air New Zealand’s network capacity is expected to be approximately 50% lower than the prior comparative period, driven by a reduction of approximately 90% in the fourth quarter.