Air New Zealand chief executive Nikhil Ravishankar says the airline will cut some flight frequencies because of “unprecedented” jet fuel prices.
Ravishankar this morning said the airline would consolidate 1100 flights affecting about 44,000 customers.
That process would happen over the next six to eight weeks, he told Ryan Bridge TODAY.
That meant about 5% of flights to early May would be cut.
Affected customers would find out from today if their flights were impacted.
“There are frequencies that are being reduced across almost every one of our domestic routes, and we’re looking at transtasman,” Ravishankar said.
Flights to the Pacific and to regional destinations such as Hokitika, Timaru and Taupō were less likely to be impacted, he said.
Ravishankar said jet fuel prices were still high this morning, but the airline could not pass on all related costs to customers who were already facing cost-of-living challenges.
“Affordability of air travel is under real pressure.”
The consolidation would spare some regional routes where services were not frequent.
Ravishankar told Newstalk ZB almost all affected passengers would be reaccommodated on flights the same day as they’d booked for.
He said fuel was now the airline’s biggest cost.
The global average jet fuel price last week rose 58.4% compared with the week before.
Ravishankar said a normal price for jet fuel was about US$85 a barrel but the product was now at about US$170 a barrel.
“Every cent matters in this game.”
A key challenge for airlines came from the crack spread, the premium energy companies applied to refine jet fuel from crude oil.
Ravishankar said the crack spread was “at elevated levels this morning at about US$75″.
Brent crude this morning was trading at US$92.51.
Fuel was the airline’s second-biggest expense after labour in the last financial year, at $1.48 billion.
But Ravishankar this morning said fuel costs in the current crisis had doubled.
“It’s a volatile situation.”
He said the airline had not asked for any specific help from the Government.
He said the airline had noticed some more demand for flights to Europe through the US and Singapore.
But that increase was modest for the airline, Ravishankar said.
United Airlines chief executive Scott Kirby last week said demand was surging from people wanting an alternative route to Europe.
“Each day this week, we have booked over 1000 people from Australia and New Zealand to Europe. Last year, we booked less than one a day,” Kirby said in comments CNBC reported.
Meanwhile, drones struck fuel tanks in Oman overnight as Iran targeted Persian Gulf energy infrastructure, AFP reported.
AFP said Iran regarded any ships in the Strait of Hormuz belonging to the US, Israel or their allies as “legitimate targets”.
And the International Energy Agency (IEA) overnight agreed to release 400 million barrels of oil from emergency reserves.
“This sounds like a lot, but it only equates up to 20 days of the normal flow of oil transported through the Strait of Hormuz,” ASB economists said.
Despite the IEA announcement, oil prices climbed about 5-6% overnight for near-term contracts, the economists said.
The IEA said its 32 member countries made the decision after an extraordinary meeting to address war-related disruptions.
New Zealand, Australia, the US, Canada, Japan and South Korea are IEA members.
Most other members are European countries.
Minister of Finance and for Economic Growth Nicola Willis said senior ministers met last night to discuss potential disruptions to petrol, diesel, and jet fuel supplies.
“We are actively monitoring domestic and international fuel supply conditions and assessing any impacts on New Zealand’s energy security,” she said.
“This is a fast-moving situation and New Zealand needs to be prepared for all scenarios.”
Willis said despite that, New Zealand was in a healthy position.
She said ministers were briefed on the IEA decision.
She said New Zealand was obliged to contribute to the release, which aimed to lower oil prices globally and stabilise the market.
“New Zealand’s contribution is equivalent to about six days’ fuel supply here.”
Willis said ministers were told local fuel companies had no major supply chain issues and fuel stocks onshore and in transit were strong.
On Monday, Willis said the country had 28 days of petrol, diesel and jet fuel on hand, with a further 29 days on ships en route.
John Weekes is a business journalist covering aviation and court. He has previously covered consumer affairs, crime, politics and courts.