Air New Zealand facing new cuts

Air New Zealand has flagged more job cuts as it strives to cut $140m from its wage bill and return to profit by 2022.

Air New Zealand planes sit parked on the tarmac as sheep graze in a nearby field at Christchurch Airport. Picture: AP

Air New Zealand has set a goal of reducing its wages bill by another $NZ150m ($140m) as part of an 800-day plan to return to profit by 2022.

CEO Greg Foran has outlined to the New Zealand Securities Exchange his vision for the airline, following his first 100 days at the helm which he quipped “had not gone entirely as expected”.

He said by the time annual results were delivered in late August 2022, he hoped to report a return to healthy profits even though Air New Zealand may be 70 per cent of its pre-COVID size.

“We can see an Air New Zealand of 2022 that is flying about 13 million customers annually versus almost 18 million pre-COVID-19,” Mr Foran said.

“We will be highly efficient and operate fewer wide body aircraft. The good news is that Air New Zealand could be more profitable in the future than before, allowing us to start reinvesting in our customer experience.”

Further job cuts seemed likely on top of the 4000 redundancies already announced, with Mr Foran launching a plan to remove an additional $140m from the airline’s wages bill.

“Our wage bill is down by a third now but our revenue has fallen by more than two-thirds,” he said. “We need to balance the scales further.”

In order to do that, the carrier would be engaging with workers and unions on the best way to help reduce the labour bill.

“We are open to exploring all options with unions that help meet our cost saving goals, but I do want to be clear that we need to brace ourselves for more discussions around leave without pay, reduced hours, job share, voluntary exits with redundancies as the last option,” said Mr Foran.

“Thinking this through carefully will be important so that as the airline regains more customers and routes we are ready to take that volume on. I am really sorry we are in a situation of needing to reduce our wages bills further, but I believe this is what we need to do with some urgency.”

He hoped the airline would have resumed trans-Tasman flights by September 1 but was not factoring in any long-haul flying “of note” until next year.

Mr Foran said it seemed unlikely the New Zealand government would fully open its borders to international travellers until there was a vaccine, effective treatment or elimination of COVID-19 in key markets.

“That said one glimmer of hope of late has been the extra cargo movements, which are helping the economy and our cashflow as well as the heartening support we are seeing in domestic travel,” he said.

As Air New Zealand began to “thrive” again, Mr Foran said it would be smaller and flying fewer routes but would continue to strive for excellence.

“Every airline in the world has been stunned by the COVID-19 pandemic. This event is not a hiccup; very few airlines will return to the former ways of working,” he said.

“The survivors will be more focused, lower cost and provide better customer service.”

As yet Air New Zealand has not had to draw on a $NZ900m loan facility provided by the government and last month reported liquidity of $NZ640m.