Air New Zealand jobs go as Oliver Wyman consultants look to carve costs

Consultants are reviewing roles at Air New Zealand's head office. Photo / Dean Purcell.

Air New Zealand's programme to carve out overhead costs has already led to redundancies from its head office, weeks before consultants deliver their final review of its operations.

The airline will not specify how many positions have already been lost or will go in the review. But overseas consultants are concentrating on making savings among about 2000 non-union and non-customer-facing positions. When the review was announced, it was aimed at making 5 per cent savings.

Several staff are understood to have already left or are about to leave and areas being reviewed in head office cover everything from public relations, sales, marketing, contact centres, finance, digital, human relations and customer loyalty.

The union representing many engineers, cabin crew and other staff, E tū, says that while there are ''no overt redundancies planned so far'' among its members, the airline was reviewing its air and ground operations in an effort to cut costs.

The union's head of aviation, Savage, said today the airline wants to re-organise onboard and ground-based cabin crew leaders in its Boeing 777 and 787 fleets. This includes about 100 E tū members.

''We are in discussions with Air New Zealand and are working on behalf of members to maintain industry standards and prevent involuntary job losses,'' he said.

Consultants Oliver Wyman have been working for two months at the airline and have four weeks left there.

A final set of recommendations will then be considered by the airline's board and 10-member executive, which in May announced that it had imposed a salary freeze on itself.

''At this point there is not a number tagged to how many positions could be removed from the organisation,'' said chief financial officer Jeff McDowall.

The airline announced its ''Business Realignment Project'' in March, which included not only delaying some plane orders, cutting capacity and network growth but also carving 5 per cent from overhead costs. It was hoped then any job losses would be through natural attrition.

New York-headquartered Oliver Wyman has sent consultants from Australia and the United States to review the airline.

''This includes reviewing our overhead cost base to see where we can create efficiencies. While this will include but not be limited to reviewing labour costs in non-unionised areas, the purpose is not to change the structure of Air New Zealand, but to identify any duplication of roles or processes and help break down silos so teams can work more efficiently together globally,'' said McDowall.

McDowall said the Oliver Wyman work involved significant data analysis, process mapping, industry and airline-specific benchmarking.

It was being carried out in collaboration with the airline's senior leadership team and other ''functional experts'' in the company.

"We deliberately selected an external consultancy for the outside-in perspective they can provide, and because they are able to benchmark us against businesses in other industries to give us a clear understanding of how we work compared with the rest of the world.

"While we are at the top of our game in a lot of areas, we can still do better, and continuous improvement is important if we are to meet our potential as a company".

Jeff McDowall, chief financial officer for Air New Zealand. Photo / Dean Purcell

The airline has previously used consultants sparingly but McDowall said today it had deliberately selected an external consultancy for the ''outside-in perspective'' they could provide.

''And because they are able to benchmark us against businesses in other industries to give us a clear understanding of how we work compared with the rest of the world,'' said McDowall.

Oliver Wyman team was mindful Air New Zealand was not an ''average airline,'' said McDowall.

''One of our most important assets is our unique culture. For these reasons they are taking the time to really understand the nuances of our business.''

The review comes as the airline faces big changes at the very top.

It is searching for a new chief executive to replace Christopher Luxon, who is due to leave the airline on September 25, the same date that current chairman Tony Carter leaves the role and is replaced by board member Dame Therese Walsh.

Air NZ Dreamliner engine problems have weighed on the company. Photo /Brett Phibbs

Soft demand in some markets, continued elevated fuel prices, strong competition on many routes, challenges digesting recent high rates of growth and fallout from the Rolls-Royce Dreamliner engine issue had dented the profit outlook for Air New Zealand.

While its latest operating figures showed a 1.6 percent increase in unit passenger revenue per available seat kilometre - known as RASK - in June from a year earlier, Macquarie analysts have an ''underperform'' rating on the company.

Although fuel prices had edged down since the company's last trading update, it was unable to pass on higher fuel on customers in the current demand environment.

Macquarie said targeted cost savings of $60 million only partially bridged the earnings decline of $180m seen over the current financial year.

''Remaining gains to restore ROIC (return on invested capital) are not yet clear enough,'' analysts said.

Air New Zealand's share price has fallen from a high of $3.41 in the last 12 months and this afternoon was trading at $2.76.