Air New Zealand has admitted it was unprepared for the disruption wrought by Covid-19 and overwhelmed by the number of people seeking refunds.
Air New Zealand chief executive Greg Foran. Photo: RNZ / Dan Cook
A select committee at Parliament this morning heard the airline's boss outline just how bleak things got during level 4 lockdown and how it failed to cope.
Greg Foran said at one point during the lockdown, Air New Zealand was operating at 1 percent of normal revenue.
The chief executive fronted MPs today to say a credit system - which has not found favour with customers - was a necessary move to keep the airline afloat.
"If we had refunded all those refundable shares, we would have put this business in a very difficult position in terms of cash so essentially it came down to affordability."
Independent aviation commentator Irene King said there was no way an airline could have predicted a revenue drop so huge.
Air New Zealand should have been more prepared, and seemed to be "in a state of paralysis" at first, she said.
Foran told the select committee the airline's systems simply could not cope with the sheer scale of refund requests - with as many 75,000 calls coming in on one day.
That was up from 5000 pre-Covid.
"We weren't ready to handle this. We've obviously reacted as quickly as what we could. But the sheer scale ... of calls has clearly caught us in a difficult situation."
The airline launched an online tool this week to try to help those looking for credits, but King is questioning why that was not already in place before the pandemic.
"Clearly it's pretty innovative technology. It could have been there a long time ago and one would question why it in fact wasn't there. They were dependent on a very manual system, and you as a customer actually pursuing your credit."
Commerce and Consumer Affairs Minister Kris Faafoi said customers deserved to know about credits or refunds.
Commerce and Consumer Affairs Minister Kris Faafoi. Photo: RNZ /Dom Thomas
"It's taken a long time. I see they've taken a step with the online portal this week, but I understand that's been flooded as well. I still think - and I said that from the beginning - they've got a communications issue.
"I think they've done better, but given the challenge the airline is going through and other airlines are going through - making sure they keep in touch with the consumers about what their general position is on refunds and credits is pretty crucial, because there are a lot of people either waiting for that money or wondering what they can do in terms of future travel plans."
Foran said about 20,000 compassionate refunds had been issued for customers.
"This is where people clearly have been impacted financially themselves and they need that money back, or perhaps they're of an age where they're never going to travel again. We look at those individually and where we can do what's right by the customer then we get on and do that."
Consumer NZ head Jon Duffy said the compassionate approach was helping the airline claw back customer trust.
He said the number of complaints they were getting about the airline was far less than it had been over the past two months.
"They've dropped right off. So I think the fact that Air New Zealand are now engaging with their customers and the fact they are making refunds on compassionate grounds has gone a long way to easing some of the concerns consumers had."
No one is out of the woods yet, though.
King said there would be pressure to create a law to mandate refunds - which tended to be the norm with European airlines
"Unless you treat your customers with respect and compassion, there will be a lot of pressure on government to change the law in such a way that it removes any discretion from the airline. They will have to refund if they cancel for whatever reason."
The government has not ruled out providing more assistance to the airline on top of the $900 million loan it has already offered.