Air New Zealand’s decision to award chief executive Greg Foran $2 million worth of shares as a bonus will come under further scrutiny after he revealed the airline is burning through up to $85 million per month.
Speaking at a tourism summit in Wellington on Tuesday, Foran said, “We’re burning $65m to $85m a month, you do the math. We borrowed $900 million.
“If nothing changes between when we started to draw down the loan around August, in about 12 months’ time you have got a bit of a problem.”
He also revealed that it would take Air New Zealand a couple of months to “thaw out” the 777s currently stored in the desert and hoped the airline would be given notice when international border restrictions are lifted.
“Will we get that? We’ll have to wait and see,” said Foran. “Probably not, so then you get into the discussion about how much flexibility you want to maintain, versus burn cash.”
At the same conference, Tourism New Zealand chief executive Stephen England-Hall warned that shutting off the country to international visitors could cost the economy $12.9 billion this year.
“There is no New Zealand recovery without a tourism recovery,” he said.
Last week, Australian Aviation reported how Air New Zealand workers were “incensed” at Foran’s bonus, which comprised of 1,369,077 rights convertible to shares.
“It’s rubbing salt into an already painful wound,” union E tū’s head of aviation, Savage. “The announcement will further reinforce the view of union members that the company’s strategy needs a complete overhaul.
“For the board and the executives to take the share options at this time will do nothing to rebuild the airline’s performance.
“Air New Zealand has drawn down on their government loan and it seems this public money is now being spent on lining the pockets of the senior management.
“The distribution of pay to staff needs to be fair, and the airline needs to retain and create decent jobs. Our national carrier should be something all Kiwis can be proud of, starting with looking after all its employees.”
Alongside Foran, six other members of the business’ top executive team were also issued rights, though thought to be less than the CEO.
Air New Zealand chairman Dame Therese Walsh said any potential payout wouldn’t take place until 2023 and only if the airline meets “rigorous performance targets”.
“Half of the executive team’s annual remuneration is at risk via short-term cash incentives and long-term share incentives,” said Dame Walsh. “In essence, if the company is meeting its objectives, then the executive will be remunerated accordingly.
“However, if the company is falling short of its performance targets, such as now during this Covid-19 crisis, the incentives are at risk. In fact, the short-term incentive has been cancelled for 2020 and 2021 and the long-term incentive due to vest in 2020 failed to meet the performance criteria. This means executives will not be paid any short term or long-term incentives this year.”
In November, it emerged that 385 international cabin crew were to be made redundant in addition to 550 furloughed staff who have not worked since July.
Australian Aviation also reported in October how Air New Zealand’s former acting chief executive, Jeff McDowall, is set to resign from the airline towards the middle of 2021.
The current chief financial officer has been with the carrier for more than two decades and will leave after he’s helped oversee the planned capital raise.
McDowall was temporarily in charge of the business from the end of September 2019 until February 2020 following the exit of Christopher Luxon.
Despite the poor international performance, Air New Zealand has seen a strong domestic recovery and plans to operate 90 per cent of its pre-COVID-19 domestic schedule for the upcoming school holidays, and even run more services to Queenstown than last year.
The announcement comes after an earlier increase in capacity for the July 2020 break saw a record number of Kiwis fly with the airline.