Air New Zealand parked up dozens of planes leading to mass cancellations. Photo / Brett PhibbsAir New Zealand boss Greg Foran maintains the airline wouldn’t be operating if it had refunded everyone who had flights cancelled but says he welcomes a review of law covering refunds.
The airline is under renewed pressure over hundreds of millions of dollars of customers’ money it is holding, with Consumer NZ saying it needs to review its hardline policy on refunds.
While other airlines have refunded all ticket types if passengers want their money back, Air New Zealand is sticking to its policy of refusing to repay non-refundable tickets except in special circumstances, even though prospects of flying overseas soon remain dim. This could mean the airline has use of the money for years.
Foran says the airline wasn’t trying to be difficult and was in the process of building more flexibility into dates from credits, which in most cases it offers in lieu of refunds.
“As I’ve been saying during the year, course I’d love to refund everyone, but if I refunded everyone then what were we going to do in terms of keeping the airline operating? It’s not Air New Zealand trying to be difficult, it’s not Air New Zealand hiding behind anything.”
At the start of last year, Air New Zealand had more than $1 billion of revenue in advance – mainly unused tickets – on its balance sheet and this had fallen to $828 million by June 30.
“Was I going to get all the wages paid for or was I going to draw down more of the [$900m] government loan or go and create more debt? Like any of these things, what we try and do is look at what do we think is right, balanced approach,” he said.
The airline was still burning through between $65m and $85m cash a month, in spite of the strong recovery of its domestic operation. Air New Zealand is 52 per cent owned by the government on behalf of taxpayers and it has the option of converting the backstop loan to equity.
“It’s not just as simple as saying, ‘pay it back’. If you pay it back where are you going to get the money from? Are you going to end up having to borrow more? Do you want to nationalise the airline? What exactly are you going to do?”
Foran said it was no different to running a bank account.
“If you’ve got the money and you’ve got it there to pay someone then go ahead and do it – if you haven’t then you’ve got to come up with a different way of doing it.”
He said airlines overseas which had repaid fares had different levels of state support with governments covering furlough schemes. In this country the wage subsidy was equivalent to about 13 weeks’ total payroll at the airline, where staff numbers dropped from about 12,500 to 8500 in the past year.
Airlines in other countries were also required by law to refund.
Under changes to the Civil Aviation Act, New Zealand could follow other countries such as European Union members which require airlines to refund if they can’t offer a service.
“I would have to say from my perspective, I’m glad that there’s a review going on.”
He started in the top job at the airline a year ago and said he walked into a “firestorm” with the airline by March dealing with 75,000 calls a day over booking problems. The previous highest daily number of calls was 9900.
“I’ve walked into a bit of a firestorm of a business which effectively operates using customers cash that they’ve given us and had to deal with all that refund issue,” he said.
”I’m glad that we’re looking at it as a country, I’m glad we’re looking at it as an industry and let’s see what comes out of that,” he said.
“If we end up putting in something like the EU situation then, in New Zealand, we’ll have to have a look at its balance sheet and how much cash it requires.”
Regardless on any law change, the airline would review its refund policy if the fallout of the pandemic on travel dragged on.
“A lot of this depends on how quickly things are going to recover, if things are going to recover quite quickly, then that’s a different approach to if we’re still sitting here in a year’s time and not doing any international travel. Then we’re going have to rethink what we do.”
The airline had just rolled out systems to deal with complex credit situations that had not yet been resolved for a “small rump” of passengers.
A review extending booking and flying windows for credits was continuing and details would be announced soon.