Airlines offered lifelines in these unprecedented times

In an unprecedented move, on Friday, the New Zealand Government offered a NZD$900 million credit line to Air New Zealand.

The offer doesn’t come without strings attached, however, the Government stipulations are not unreasonable and designed to protect the wider economy. As a 52% shareholder in Air New Zealand, the New Zealand Government has a vested interest in keeping the airline operational not just for future dividends but also because Air New Zealand is a crucial resource for tourism.

For its part, Air New Zealand will need to cancel the $123m interim dividend announced last month and not pay future dividends until any funds drawn against the loan are repaid. After six months, the loan will need to convert into equity or Air New Zealand will need to raise equity. in addition, key trade routes must remain open and domestic routes continue to be serviced.

The first tranche of NZD$600m will carry an interest rate of 7-8% and the second tranche of NZD$300m will come at a cost of 9% interest. The loan will be available for 2 years, with a jump in the interest rate after 12 months.

Meanwhile, across the Tasman on the 8th March, Australia’s airlines warmly welcomed the Federal Government’s announcement of a $715 million relief package for the aviation sector.

The spread of COVID-19 has imposed significant and unprecedented restrictions on air travel, creating a debilitating impact for airlines including Qantas, Virgin Australia, Tiger and Rex.

The package includes the refunding and ongoing waiving of a range of Government charges including fuel excise, airservices charges and airport security charges.

The relief package comes just one day after Qantas announced it would slash its international capacity by 90 per cent and domestic flights by 60 per cent.

Commenting on the Deputy Prime Minister’s announcement, Airlines for Australia & New Zealand (A4ANZ) Chairman, Professor Graeme Samuel AC, said the package was a welcome and important measure from Government. “We congratulate the Government on its decisive action to provide essential support to such a critical pillar of the Australian economy.”