Speech to the Aviation Sector June 2020
Kia ora tatou
Today I want to set out for you our Government’s thinking on the journey so far and what the flight path ahead looks like.
But firstly, I want to acknowledge how your industry has pulled together to come through this crisis.
The last three months have turned the world upside down and aviation was not only one of the first hit, but the worst hit.
The International Civil Aviation Organization estimates there are going to be up to 3 billion fewer passengers travelling by air this year and that means up to 402 billion (USD) in lost revenue from airlines alone.
They estimate a loss of 57% or over 97 billion (USD) for airports this year compared to pre-Covid forecast revenues.
Our Government recognised the impact of the pandemic was going to be huge, and it’s why we went hard and we went early.
One of the ways we moved early to support firms was through introducing the wage subsidy to help business retain their highly skilled staff.
Support is also on the way for businesses facing cash-flow issues – by placing existing debt into hibernation until they can start trading normally again.
We have also moved to provide interest free loans to small business to give some much needed cash-flow by providing assistance of up to $100,000 to firms employing 50 or fewer staff.
It’s also why we set aside $600 million of the COVID-19 relief package early on to directly support the aviation system.
When we introduced the package, New Zealand’s borders remained open to all but Chinese and Iranian travellers, and the Alert Level system had not yet been introduced.
It’s hard to believe this was less than three months ago (March 19).
We stepped in to fund things like air traffic control and security screening that the aviation industry normally pay themselves and stopping any increases to fees for the next year.
And we moved quickly to ensure New Zealand has the supplies it needs and to back our exporters.
Our national carrier, Air New Zealand stepped up and worked with NZTE to keep vital goods such as medical supplies and food flowing freely during those initial few weeks.
CEO of New Zealand King Salmon, Grant Roswarne has thanked everyone involved for listening to the challenges for exporters sending high value perishable goods overseas.
With the cancellation of the majority of passenger air routes out of New Zealand, a key challenge for King Salmon was access to air freight to send their salmon to their main markets in North America and Japan.
It would not have been possible without Air NZ’s support and willingness to try new ways of working in those early days.
Another example of them stepping up was very early on in February with the Wuhan charter flight.
They worked hard with the NZ and Chinese governments to make it work and 20 Air NZ crew volunteered to get Kiwis home when there weren’t any flights at all.
Thank you to those staff and others who have been at the forefront.
I just want to take a moment to acknowledge the level of change Air NZ is going through right now.
They aren’t perfect, but you have to recognise that they have gone from a $5.8 billion a year in revenue to less than $500 million a year pretty much overnight.
Thousands of staff have been let go.
I can’t imagine the pain the staff and the organisation are going through.
Our Government recognises how important Air New Zealand is as our national carrier and its unique and critical role in our economy and society.
It is critical that it survives this pandemic to fight another day, which is why we have given them a $900 million loan to keep them afloat.
Coming back to the wider picture, I want to thank everyone who has helped keep essential freight flowing to and from NZ.
Through the International Airfreight Capacity scheme, the Government appointed Air New Zealand, China Airlines, China Southern, Emirates, Freightways Express, Qantas and Tasman Cargo.
They are doing 58 cargo flights a week to key export and import markets like China, Japan, Australia, the US and the Pacific Islands.
This is no doubt helping with our economic recovery and we appreciate them working with us.
Airports have also stepped up to help during this time.
Christchurch Airport acted as a coordinators with smaller local freight companies and teamed up to with them to help with the Ministry of Transport process.
Because of this coordinating role, Air NZ, Emirates, and Qantas all are now serving the South Island with vital freight routes.
These have proved very successful with last Wednesday being a record freight day in Christchurch.
Two Emirates 777s picked up over 80 tonnes of freight when normally there would just be one 777.
The certainty of air freight services into Christchurch also saw logistics companies commit to around $30 million of new facilities at Christchurch Airport during lockdown. This will create new local construction jobs over the coming year.
This is a direct result of the Government and the sector working together, and I want to acknowledge the Ministry of Transport officials administering the scheme, along with Malcolm Johns and the rest of the team and Christchurch Airport.
However, we know that we can’t just focus on freight.
Essential Aviation Transport Connectivity Programme
As our response to COVID-19 evolves, we have set up a new support scheme for Essential Aviation Transport Connectivity – drawn from the $600 million aviation relief package.
This programme will support domestic passenger airlines and airports that provide essential regional connectivity, and to ensure operation of services necessary for the running of our aviation system.
Funding will only be available in the short to medium term - until domestic passenger numbers increase enough for them to be self-sustaining.
Support from the government should be seen as the last available option and operators must have made effective use of the support measures available under the Government’s COVID-19 Economic Response Package, and have taken all available and reasonable operational and commercial measures to ride-out the impact of COVID-19.
Officials are already working with some applicants for this Essential Aviation Connectivity programme.
I look forward to making an announcement on the first recipient soon.
Trans-Tasman Bubble and the future
Now let’s turn to what’s next for aviation.
The move to Alert level 1 is really positive for the sector – physical distancing is no longer required and I’m sure Kiwis will feel more comfortable flying given the progress the team of five million has made.
And while we know our international borders will effectively be closed for some time, work continues on a trans-Tasman bubble.
I’d like to acknowledge the work of the Australia New Zealand Leadership Forum and the Trans-Tasman Safe Border Group.
In particular I want to recognise the work and advocacy of Adrian Littlewood and Group co-chair Scott Tasker, both from Auckland Airport.
Both Governments have received the advice of the Trans-Tasman Safe Border Group and officials are working through the details of implementation.
Once that work is completed, it will be up to both Governments to agree on timing.
Everyone is extremely motivated to make it happen as quickly as possible.
I don’t think I need to tell you that it will be a lifeline to tourism given Australia is New Zealand’s largest source of international tourists (in 2019, 1.4 million Australians visited New Zealand).
There will be more opportunities SMEs to travel to expand their business and 75% of New Zealand’s export businesses traditionally derive income from Australia.
Our goal is to continue looking for opportunities and expand our bubble to other countries.
We will only extend our bubble to other countries as long as they meet stringent public health criteria; including no unchecked community transmission, good testing and contact tracing capability, and strong border controls.
Given our proximity and good relationships, it makes sense that the pacific countries are the next cabs off the rank.
To date the Cook Islands, Niue and Tokelau, Samoa, Tonga, Tuvalu and Vanuatu have remained COVID-free by adopting a very low or zero risk approach, while Fiji has effectively managed its small outbreak of cases through strict public health measures.
A number of Pacific countries are signalling their readiness to consider free movement of people with New Zealand when the time is right, informed by their level of confidence in New Zealand’s Covid-19 response.
Extending our bubble further all depends on the public health response of different countries and their willingness to work together.
It’s been reported that it likely will be a couple of years before a vaccine is created and widely distributed.
We are very unlikely to go back to 600 international flights a week before then, but I am hopeful we can reach a new normal where travel will steadily ramp back up as we expand our bubble to more countries.
And we are encouraging Kiwis to back their backyard through a new domestic campaign from Tourism NZ.
Kiwis spent $9 billion a year on overseas travel before the Covid-19 pandemic and we hope the campaign will encourage people to spend as much on domestic holidays as they did overseas.
Domestic travel demand should gradually return while we are in Alert Level 1 and tourism operators will no doubt be wanting to work with the sector to help bring tourists to their patch.
In conclusion, we want to ensure our aviation sector can emerge strongly from this crisis and provide air connectivity for business, domestic tourism and freight movements.
I acknowledge this has been an extremely disruptive and challenging time for the aviation sector.
This Government is doing what it takes to cushion the blow, support the aviation system and workers, and position the economy for recovery.
Now we all have a part to play in rebuilding New Zealand.
Given the size of this forum, we’ve asked for questions to be sent in advance as it would be extremely challenging to take questions from you all.
As sector representatives, John from the Aviation Industry Association, Ian from the Aviation Federation and Justin from BARNZ have all agreed to pose these questions on your behalf.
Over to you John.