Job cuts are coming to Air New Zealand, the company's chief executive says, as it faces losses of up to nearly $400 million, citing the Iran war oil crisis.
Further cuts to flights could also be on the horizon, but fare increases had gone as far as they could.
Yesterday, the airline said it was expecting a full-year loss before tax in the range of $340 million to $390 million, citing "elevated and volatile" jet fuel prices amid ongoing tensions in the Middle East.
On Breakfast this morning, chief executive Nikhil Ravishankar said, “the war isn’t helping any of us” but maintained the underlying performance of the business was “as strong as it’s ever been”.
With difficulties ahead, he said the company was targeting around $100 million in costs – the “vast majority” coming from contract renegotiations and cuts to discretionary spending.
“What’s residual is going to have to be labour,” Ravishankar said.
He confirmed that job cuts were coming and said the airline would enter a six-to-eight-week consultation period on Monday to gauge how many roles needed to go.
Asked how many redundancies he expected, Ravishankar said: “I don’t have a clear view of that as yet.”
He also indicated there could be more flights cut in the future.
Air New Zealand had consolidated around 5% of its flights by rebooking passengers and reducing flights. “That takes us out to the end of July,” Ravishankar said.
He said that when Air New Zealand releases its next schedule from August through to October, people could expect to see the current cuts extended, or “we go a little deeper” with 10% of flights consolidated – “depending on what the fuel price is doing”.
He said the company believed it had taken as many fare increases "as the customer can absorb".
“We know we’re operating in a market where cost of living is a real issue, so the intention is to be very, very mindful of further price increases.”
Ravishankar also told Breakfast that the timing of the conflict in the Middle East was “not on our side”, especially as most of the airline’s fleet affected by engine maintenance issues were returning to service.
The airline said yesterday that aircraft availability had "improved significantly" since the interim results, with all Boeing 787s impacted by engine maintenance delays expected to return to service by late June. All Airbus planes were expected to return by 2027.
“If the fuel price wasn’t what it was, then the underlying performance of the business would be in pretty good shape,” he said.
“We just have to ride it out."
He said the company had a “war chest” of about $1.3 billion in liquidity and was comfortable that it was enough to offset losses for now.
“It’s not going to last forever, but we’ve got a long runway to deal with this crisis,” he said.
Ravishankar said there was “no way” the business would ask the Government for a bailout.
The conflict in the Middle East has sent oil prices skyrocketing, with Iran effectively closing the Strait of Hormuz, a crucial shipping route through which one-fifth of the world's oil exports travel.
Aviation has been significantly impacted by the war. Air New Zealand said yesterday that jet fuel prices had skyrocketed to between US$160 and US$230 per barrel in the last 10 weeks. It said prices were around US$85 to US$90 per barrel prior to the escalation of the conflict.
Air New Zealand expected fuel costs in the second half of the financial year to be $980 million, compared to the previous $740 million.
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