Air NZ to monitor route performance

Wednesday, 24 September 2008

Air New Zealand has told shareholders it will move quickly to reduce capacity and exit routes that are under performing.

Ahead of the election, the national carrier also noted that one of its strengths was having a committed cornerstone shareholder which allows it to plan for the long term. The Government owns 80 percent of Air New Zealand.

In the short term, the airline is battling against higher fuel prices, domestic competition from Pacific Blue and a global credit crisis that could reduce demand.

"As the global credit crisis continues to deepen, its impact on demand is now emerging as a major concern for the aviation industry," chief executive Rob Fyfe told shareholders at the annual meeting today.

"Air New Zealand has been monitoring demand across all markets and closely matching capacity to demand will be a core focus for 2009," he said.

The company reduced long haul capacity by 6 percent in 2008 but from October it will up-gauge several services from Auckland to San Francisco from 313 seat 777-200 aircraft to 379 seat 747-400 aircraft.

Services to Japan were reduced during the lower demand months of September, October and November and the airline has cut an additional two-times per week Auckland to Hong Kong service operated seasonally during December and January.

Services between Wellington and Sydney during August reduced from 44 to 36 and services were also reduced between Hamilton and Sydney and Dunedin and Sydney between August and November.

On the key domestic and Tasman routes there has been a complete review of the business.

"Later this year you will see substantial improvements designed to streamline the check-in and boarding process at the major domestic airports throughout New Zealand," Mr Fyfe said.

The airline plans to strengthen its market position on routes it regards are core and profitable.

"But also to move quickly to reduce capacity or exit routes that are under-performing and offer little prospect of improvement in the foreseeable future."

The airline said 24 airlines failed in the first half of 2008 and a further 20 to 30 are expected to fail before the end of the year.

"As banks pull the plug on struggling airlines and less aircraft are ordered globally, Air New Zealand is in a strong position to take advantage of lower aircraft purchase costs," Mr Fyfe said.

Chairman John Palmer said the airline had a strong balance sheet, liquidity and a modest capital expenditure programme in the next 18 months.

NZPA