The full economic impact of the covid-19 crisis became clear last night with a stunning announcement from Air NZ that it is to become essentially a domestic airline and could take years to get back to its former size.
It is proposing to lay off 3500 staff and talks have begun with unions about that. But it is warning there could be more.
The airline’s CEO, Greg Foran, said in a message to staff last night that international tourism flows made up two-thirds of Air New Zealand’s revenue.
“So. that is billions of dollars in ticket sales we won’t be booking and more than 1.5 million tourists who won’t be arriving here to fly on our domestic network,” he said.
“In that light, it is clear the Air New Zealand which emerges from covid-19 is a much smaller airline and could take years to get back to its former size.
“Therefore, we are planning to be a domestic airline with limited international services to keep supply lines open for the foreseeable future.
The Air New Zealand of pre-covld-19 employed 12.500 people around the world.
“Clearly, we will be smaller for some time, and we will need fewer staff.
“We expect that even in a year’s time, we will be at least 30 per cent smaller than we are today.”
POLITIK understands that the Government is working on proposals to absorb some of the redundant staff in health care and the Healthline call centre.
The news confirms what may were fearing was becoming a reality; that this crisis is going to last much longer than the four-week lockdown.
The Prime Minister more or less acknowledged this yesterday.
“We have to continue to try and protect ourselves while we wait for a vaccine,” she told her post-Cabinet press conference.
“So it does mean border restrictions will be part of our management system.”
POLITIK understands that officials are now working on the assumption that there will be border restrictions in place till at least the end of the year.
Ardern’s warning is because of the strategy the Government is following, which is a so-called suppression strategy.
The University of Auckland’s Te Punaha Matatini team of mathematicians and physicists said in a report last Wednesday that suppression strategies can succeed in delaying an outbreak, but only for as long as such control measures can be sustained.
Once controls are eased or restricted, an epidemic is likely to follow as no herd immunity has been acquired, they said.
“Suppression has the advantage of buying time until a vaccine and/or treatment become available and allowing NZ to learn from rapidly unfolding events in other countries,” they said.
But for the suppression to work, tough border restrictions will have to be in place, effectively destroying Air New Zealand’s business.
And Foran suggested that what the prime Minister is hinting at could mean even more staff reductions.
He warned that the extent of this reduction is based on conservative assumptions “and we may have to change these as the situation evolves, especially if the Level Four Alert goes beyond the planned 28 days or border restrictions are in place for a prolonged period.”
We may hear more about the suppression strategy today when the Director-General of Health presents new modelling on the potential impact of the covid-19 pandemic.
That modelling will be discussed by the first meeting of the special Covid-19 Response Select Committee.
That will be chaired by Opposition Leader, Simon Bridges and include Labour MPs Michael Wood; Ruth Dyson and Kiritapu Allan along with NZ First MP, Fletcher Tabuteau and Green co-leader, Marama Davidson.
Apart from Bridges, National will be represented by MPs Paul Goldsmith, Michael Woodhouse, Dr Shane Reti and Louise Upston.
The committee, which meets at 10.00 a.m. is expected to be broadcast live by Parliament TV.
The Air New Zealand statement last night will cast a grim shadow over the committee.
It is expected that Health Minister, David Clark; the Director-General of Health, Dr Ashley Cooper; the Chair of the All of Government officials’ committee, John Ombler and former Otago University epidemiologist, Sir David Skegg will all appear before the committee tomorrow with Finance Minister Grant Robertson and Treasury Secretary Caralee McLieish expected on Wednesday.
The Government is also expected to provide further information today on what are or are not essential businesses.
Particular issues have arisen with an embargo on small weekly newspapers being barred from printing and distribution — though they may still operate online.
And the Prime Minister suggested at her press conference that essential home appliances that needed replacing might be able to be purchased online.
Meanwhile, there is still confusion about whether stranded tourists will be able to be evacuated from New Zealand.
There are reports that flights will take Koreans and Germans home on April 1, but the position of the 6000 plus British tourists still here is uncertain.
A particular problem is the refusal of the New Zealand Government to allow Air New Zealand to operate domestic flights to take the tourists s from wherever they are to an international airport.
POLITIK understands this has stopped 20 flights back to Germany alone.
This will not be the last bad economic news we hear because of this pandemic.
Obviously, the effective closure will ripple all through the tourism industry. There will be more casualties there.
There was one bit of good news yesterday; the Australians have agreed to allow New Zealanders to access their version of the wage subsidy scheme.
This has been the subject of intense discussions both at the official and political level between Australia and New Zealand for the past ten days or so.
Australia’s refusal to allow New Zealanders who had arrived there since 2001 to access the covid-19 wage subsidy has attracted over 250,000 signatures to an online petition.
Ardern has discussed the matter with Australian Prime Minister on a number of occasions in their regular phone calls; the last one was yesterday morning.
“New Zealanders are a core part of the Australian workforce,” she said last night.
“Many are working on the front line in essential services.
“Others have built their careers there and paid taxes for years, so it’s really pleasing the Australia Government has agreed to provide them with a wage subsidy at their time of need.
“We need to unite and look after every one to beat COVID-19 and Prime Minister Morrison, and I are in regular contact about our respective efforts to beat the virus and support our people.”
It’s going to be a long hard, bitter battle.