After the Ansett debacle mind you. Air Koru have come a long way since then. There is no doubt that they are dong pretty well under some pretty good leadership. New Zealand Government owns most of Air NZ as a result, so it's not like it was money for jam or anything.
As for the pilot demotions, I doubt it will go all that far down. Mt Cook, Air NSN and Eagle are all separate companies. I don't think you'll see it going much further than the 767 or maybe the A320.