20 Nov 2008

Air NZ warns more cuts may be needed

3:39 pm on 20 November 2008

Air New Zealand is warning it may need to ground more aircraft and lay off more employees if demand for air travel contrinues to fall.

The airline announced on Wednesday it will axe 200 employees as it faces a sharp drop in the number of passengers flying across the Tasman and on long-haul flights.

It already has one 747 plane parked on the tarmac and says it may ground another by early next year.

On top of dealing with falling patronage, Air New Zealand's fuel bill will cost an extra $200 million this year, based on the current price of oil and exchange rates.

The airline expects to save $20 million from the redundancies and spending review, but chief executive Rob Fyfe says the company cannot predict the extent of the downturn and there could be more layoffs.

Of the 200 redundancies, half will be from long haul cabin crew. Others will be in recruitment, airline operations and technical operations planning and management.

The airline's net profit fell 1% to $218 million in the July year, largely due to higher fuel prices.

International trend

International business and first-class air travel dropped sharply in September due to the global financial crisis.

The airline industry body IATA says it dropped 8% on the same month last year, with Asia most affected.

Economy air travel also decreased by 4% in September, when the credit crisis triggered severe market losses and raised worries about an economic decline that could hit both business and leisure travel.

IATA says the ongoing financial turmoil has likely continued to pinch premium travel, the most lucrative sector for airlines.

Prime Minister John Key, who is also the Minister of Tourism, told Morning Report on Thursday the tourism sector faces some interesting challenges in the face of the global economic crisis, including identifying big markets where it can get a better market share.