Air New Zealand is 52 per cent owned by the Government.

The Government may need to spend as much as $3 billion on an Air New Zealand bailout in order to stop the airline from going under due to the impact coronavirus is having on the company, an aviation commentator says.

Air New Zealand shares were placed in a trading halt on Monday to allow time for the airline to assess the impact of the Government's new travel restrictions designed to stop the spread of Covid-19. On Wednesday the trading halt was extended until either an announcement was made by the company or market open at 10am on Friday.

Since the Government introduced restrictions requiring everyone arriving in New Zealand to self isolate for 14 days, Air New Zealand has announced plans to reduce its long-haul capacity by 85 per cent and its trans-Tasman capacity by 80 per cent from March 30 until June 30. Its domestic capacity will be reduced by around 30 per cent in April and May.

The airline was left out of a $600 million stimulus offered to the aviation sector to help cope with fallout from the coronavirus outbreak, but an announcement from the government on Air New Zealand is imminent.

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Transport Minister Phil Twyford said an announcement on Air New Zealand was likely by the end of the week.

SUPPLIED Air New Zealand chief executive Greg Foran has told staff that the company's workforce of 12,500 could be reduced by up to 30 per cent.

"We need the national carrier to play a critical role over the next few months and for a year or more helping us get through the economic disruption," Twyford said.

"They are a vital piece of our national infrastructure and we need them to step up."

Air New Zealand chief executive Greg Foran said on Monday that, based on forecasts, the airline's 12,500 workforce could reduce by up to 30 per cent, which equates to about 3750 jobs.

LAWRENCE SMITH/STUFF Air New Zealand shares were placed in a trading halt on Monday.

Irene King, former chief executive of the Aviation Industry Association and now an independent aviation commentator, said the Government may need to throw between $2b and $3b at Air New Zealand in order for it to stay afloat.

"It's billions of dollars we're talking," King said.

A bailout would need to include staff wage subsidies because Air New Zealand could not afford to make mass layoffs due to costly redundancy clauses many workers would have in their contracts, she said.

Mothballing planes was also an expensive exercise as was reopening routes and returning planes to service, she said.

"There's just going to have to be some really, really significant support in there just to keep Air New Zealand ticking over."

Air New Zealand's largest shareholder is the Government, which owns 52 per cent.

In 2002, after the September 2001 terror attacks and the collapse of Air New Zealand subsidiary Ansett, the airline received a $885m bailout from the Government.

In the 2019 financial year Air New Zealand made $5.8b in revenue and had cash on hand of $1.1b.

Its labour bill alone was $1.4b.

UBS aviation analyst Marcus Curly said it was forecasting Air New Zealand to be burning $211m a month from the start of April.

A stimulus would need to be large enough for the airline to remain solvent for long enough to "come out the other side" of the crisis, he said.

"The question people need to ask themselves is: How long?"

Economist Benje Patterson said the Government was clear that it intended to keep freight corridors open and Air New Zealand would play an important role in this, essentially acting as a freight service for the foreseeable future.

But freight was "just the icing for an airline" and flights that remained wouldn't be commercially viable if there were no passengers to fill seats, hence the need for a cash injection, he said.

"There certainly won't be general day to day leisure travel or general day to day business travel except for very specific circumstances."

One of the fastest ways for an airline to raise money was to go to shareholders with a share offer, he said.

Shareholders would also be entitled to participate in a share offer based on how much of the airline they owned however, given the current climate and future uncertainty they may not want to buy more shares.

If that's the case then the Government could step in and buy remaining shares that were not taken up in the share offer.

If this scenario played out then the Government's shareholding of Air New Zealand could increase significantly, he said.

"There will be urgent work occurring between Air New Zealand, government and investment banks occurring to get the details of the scheme fleshed out," Patterson said.

"The complexities will not just surround price, but guidance that is given for forward earnings in such an uncertain world."

There would also be discussions regarding whether there were interim government subsidies of international services that were unviable from a passenger load perspective, but were needed to maintain freight corridors.

"All these details need to be fleshed out so that shareholders are equally informed in the capital raising."

On Monday Forsyth Barr analyst Andy Bowley said a sharp decline in forward bookings meant the airline's balance sheet would be "under duress".

"Substantial earnings losses are now likely over the coming months and the need for balance sheet support is increasingly likely," Bowley said.

He estimated Air New Zealand's fixed overheads to be $160m per month.

"The government's position as majority shareholder is helpful (we expect it would step in and underwrite a capital raise, if required), assuming politics don't get in the way of potential financial assistance."