Air NZ boss apologises over customer refund problems

Greg Foran told MPs  that Air NZ is performing better. Photo: supplied
Greg Foran told MPs that Air NZ is performing better. Photo: supplied
Air New Zealand's boss has publicly apologised for the airline's handling of customer refund requests, saying staff "could not cope" as 75,000 people called in a single day.

Chief executive Greg Foran and other Air NZ executives are appearing before a select committee of MPs today to detail the impacts Covid-19 have had on the national airline.

The airline - 52% owned by the Government - went from making $6 billion to just $60 million at one point when the country was at Level 4 in response to Covid-19 earlier this year.

Foran, who became CEO in December last year, said Air NZ is performing better after being in "survival mode". It had yet to tap into the Government's $900 million loan, but expected it would need to shortly.

The national carrier was making "good progress" on phase one of its cost-cutting programme and continues to work with union representatives on staff redundancies.

So far, Air NZ had made 4000 staff redundant due to the Covid-19 crisis, Foran confirmed.

He also warned that many airlines around the world were running out of cash: "My best guess... is that a third of the airlines that we see today will disappear, if this carries on into next year."

'Just could not cope' with refund issues

The company's inability to handle the volume of customer credit inquiries had caused concern, Foran conceded.

Pre-Covid, Air NZ would field 5000 calls a day through their call centre each day. But that reached as high as 75,000 in one day, due to the refund issues.

Foran said if every customer received a refund Air NZ would have been put in a "very difficult position".

There have been 20,000 compassionate refunds made so far.

When pressed on the flight of one customer, who was not able to get a refund, Foran apologised.

"Our systems and process just could not cope," he said, when speaking about why refunds were not given.

"Frankly we caught without enough trained people. We weren't ready to handle this," he said, adding that the sheer scale of the number of people wanting refunds through the call centre "really caught us in a difficult situation".

"I apologise - we are improving. We have more work to do. We will not leave this stone unturned because you never know when Covid-20 might come."

Asked if phase one - staff cuts - was finished, Foran said it was "by and large" done. Phase two began at the start of June.

"Redundancies should be the last option," he said.

Any more job losses at Air NZ would depend on what happened with New Zealand's borders.

About $2 billion of the $6 billion in pre-Covid revenue was overseas, long-haul flights. He said if that revenue did not return then Air NZ would need to have another look into costs.

Foran also revealed that the airline plans to re-introduce "mystery weekends" to stimulate domestic travel.

It was hard to predict what would happen next in the industry but Air NZ was fortunate to have a strong domestic business, he said.

"We have been pleasantly surprised with what we have seen," in terms of domestic travel.

Foran confirmed they are working on a new safety video with Tourism New Zealand. That will be done by the end of the year, he said.

Foran said he has spoken with 20 mayors in the last two or three weeks.

"We do want to stay close to that," he said, because Air NZ is a domestic businesses at the moment.

There was a boost in passengers over the school holidays - in fact, he said there were more flights to Queenstown this year than this time last year.

But Foran warned when the travel bubble does come into force - "not everyone can fit into Queenstown".

"We didn't think domestic would come back as well as it did," Foran told MPs.

He was upbeat about how the domestic travel side of the business was going.

'Unprecedented' Covid impact

Foran confirmed Air NZ was looking "at some point" to start flying to the Pacific Islands. But going back to Australia will be a lot longer.

He had been working with the Government on a Pacific Island travel bubble.

Foran said he has been asking the Government's Foreign Affairs Ministry about what Air NZ could do to help.

An important issue was how Air NZ would handle transit passengers and the intermingling of transit passengers is still a big question that Air NZ is trying to "wrestle to the ground".

The airline has been aiming to fill their planes up with as much cargo as they could. Air NZ is flying five flights a week to Shanghai, getting cargo into the Chinese market.

Foran told MPs that many airlines were now running out of cash and a third of them may not survive the Covid crisis. He said that third might be replaced by low-cost airlines. Many will have taken on billions of dollars worth of debt, he said.

Air NZ chief financial officer Jeff McDowall said the airline was looking at funding options. On the $900 million government loan, he said Air NZ has yet to use it yet - but does expect to draw into in soon.

Foran reiterated that the events of Covid-19 were "unprecedented" and at one point during lockdown the company was operating at just 1 per cent of its normal revenue.

Foran thanked the Government for its help in provided Air NZ with the $900 million loan, saying if everyone got refunds, Air NZ would have been put in a "very difficult position".

However, Air NZ was fortunate to have a strong domestic business, he said. "We have been pleasantly surprised with what we have seen," in terms of domestic travel.

The closure of New Zealand's borders to non-New Zealand citizens in March had an immediate impact on the company's books.

The $900 million loan could be converted into equity – meaning the Government's stake in the company could increase, rather than the loan being paid back. At the time, Finance Minister Grant Robertson did not rule out further bailouts.

While the airline and its bankers - publicly speculated to be UBS and Forsyth Barr - are said to be ready to undertake a capital raising of around $1 billion, the Government is said to have signalled there is no point coming with a proposal before the election, less than two months away.

Since then, the news has not got much better for the company.

More than 3500 job losses have been announced so far and the executive team has taken a substantial pay cut.

"As we have done in all parts of our business, we are creating the structure that is appropriate for an airline which we expect will take two years to get back to 70 percent of its former size," Foran said in a statement  in May.




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