Air New Zealand gets $514 million lifeline from government as virus hits travel

By Jamie Freed and Nikhil Nainan

SYDNEY/BENGALURU (Reuters) – Air New Zealand (NZ:) said on Friday it was offered a NZ$900 million ($514 million) lifeline by the government to keep the airline flying as travel curbs to stem the coronavirus outbreak threaten the survival of many airlines globally.

Shares fell as much as 35% to the lowest level since 2012 in their first trading since last March 13.

The airline had halted trading after the New Zealand government said on Saturday all arrivals would need to self-isolate for two weeks. The restrictions were extended further on Thursday, barring all non-residents from entering the country.

Airline industry executives worldwide have called for state support now that passenger operations are collapsing at an unprecedented rate and governments curb travel drastically.

“Without this intervention, New Zealand was at risk of not having a national airline,” New Zealand Finance Minister Grant Robertson said in a statement.

The national carrier, which is 52% government-owned, said the loan would be given in two tranches, with interest rates ranging from 7% to 9% a year, and on condition that it cancels its interim dividend worth NZ$123 million ($69.78 million), which Air New Zealand said it would.

“The loan facility ensures that Air New Zealand can continue to play a vital role in connecting New Zealanders and our businesses with each other here at home and around the world,” Air New Zealand Chairman Therese Walsh said in a statement.

The government has the ability to seek repayment through a capital raising by the airline after six months, or converting the loan to equity. The loan will be available for 24 months.

“While today’s action means the company can continue to operate, given the unprecedented shock to the global aviation industry caused by COVID-19, Air New Zealand has advised that there will unfortunately be job losses as capacity is cut,” Robertson said.

The airline said on Monday it would cut long-haul capacity by 85% and look to lay off some permanent employees as the coronavirus crushes global travel demand.

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