The loan will help Air New Zealand to keep serving essential routes and maintain its operations. Credit: Robert Frola.

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The New Zealand Government has granted a bailout offer of up to NZ$900m ($522m) to flag carrier Air New Zealand.

The move comes at a time when global airlines are struggling to cope with the impact of the pandemic, which has decreased flight demand worldwide.

The government and Air New Zealand signed a 24-month debt funding agreement that will enable the airline to loan the amount if its cash reserves drop.

The agreement also allows the government to convert the loan into equity in Air New Zealand. The government already holds a 52% stake in the carrier.

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With the loan amount, Air New Zealand is expected to keep serving essential routes and maintain its operations.

New Zealand Finance Minister Grant Robertson said: “This agreement means that Air New Zealand is in a position to play its part in making sure Kiwis can return home from overseas and that essential flights and freight lines for goods like pharmaceuticals remain open by ensuring flights continue to and from key international destinations.

“The agreement also safeguards the domestic network, with flights assured to all current destinations.”

On average, Air New Zealand operates 3,400 flights every week, serving around 17 million passengers annually.

The company announced layoffs due to a reduction in capacity amid the Covid-19 outbreak.

Robertson added: “The government is actively working with Air New Zealand on what can be done to support these workers.

“This includes work underway through a separate process to mobilise some of Air New Zealand’s workforce to other areas of our fight against Covid-19, including supporting the health response.”

Notably, the Australian Government announced a series of measures this week to support the aviation industry.