Review prudent move by Air NZ, Forsyth Barr research head says

Air New Zealand was being prudent in reviewing its operations in a volatile market place, Forsyth Barr head of research Rob Mercer said yesterday.

Air NZ is understood to be considering cutting hundreds of jobs as it seeks to claw back $1 million-a-week losses suffered on its long-haul network.

However, Mr Mercer said that in his opinion Air NZ would not cut the routes to London either through Los Angeles or Hong Kong.

It might consider changing the frequency and timing of the routes as both left at times that were not attractive to premium customers.

Air NZ had 75% of the Auckland to LA market and 50% from Auckland to Hong Kong but the next legs on to London were the problem, he said.

"It is a real challenge for those legs of the journey. The stop is part-way through a long-haul journey and it is not the flashest time to be leaving.

There are also plenty of choices from Hong Kong or LA to London."

Air NZ regularly reviewed its operations and this was part of its ongoing review process, Mr Mercer said.

The national carrier supplied a lot of capacity during the Rugby World Cup, with probably less demand than expected six months previously.

"We expect Air NZ to still make a profit but if the demand is not there, we expect the airline to adjust the size of their business."

Air NZ was already reviewing its seating ratio and had previously reviewed its long-flights to China, San Francisco, Vancouver and LA during the global financial crisis, he said.

One of the major things to help Air NZ was its fleet renewal programme. Maintenance and operating costs would reduce with the new 777-300 aircraft.

The new aircraft were more fuel efficient and gave the airline a chance to look at improving its costs and being innovative with its products, Mr Mercer said.

The New Zealand Herald reported that Air NZ had confirmed a review of its long-haul operation but was refusing to rule out withdrawing its flagship daily services to London.

The company reportedly told staff a corporate overhead review was under way.

The news came as Air NZ aimed to boost profits by $110 million in time for the 2015 financial year.

House of Travel director Brent Thomas said he did not think the airline would sever its ties with Britain as it was synonymous with Kiwis travelling there.

"But obviously they've got to look at what's viable and what's not."

The greatest potential difficulty from a withdrawal by Air NZ was the loss of cheap "add-on" flights from provincial centres to catch long-haul services from Auckland or Christchurch.


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