More Air New Zealand flights will be cut as fuel prices continue to bite, with passengers finding out if their plane is affected by the end of this month.
Services from after the school holidays end on July 19 through to October could be affected, with domestic as well as international flights being looked at, the airline’s chief executive Nikhil Ravishankar told Ryan Bridge TODAY.
“We will make no further cuts ‘til the end of the July school holidays, to give people assurance … post the July school holidays, August, September, October, we’re currently looking at what further cuts we might have to make, but that all depends on the cost of fuel.”
Customers would be told of any cuts by the end of May, Ravishankar said.
The national carrier expects to lose up to $390 million this financial year ending June 30, with the Middle East war pushing jet fuel costs up to about $980m – $240m more than it had previously expected to pay, Air NZ said in an NZX trading update yesterday.
About 5% of the airline’s roughly 500 daily flights had been cut since the conflict began, mostly by consolidating off-peak services so planes weren’t being flown half empty, Ravishankar told Bridge.
“Going forward, if the prices remain at the same levels, we’ll be looking at cuts somewhere between 5 to 10%. So it won’t be a significant amount of cuts.”
Two price increases had allowed the airline to recover about 40% of the “incremental cost of fuel since the conflict”, he said.
“The other 60% is where that balance sheet that [Finance] Minister [Nicola] Willis was talking about helps us sort of absorb the shock.
“And we’ve been building a very large shock absorber for this very moment. So we’re prepared to deal with that.”
Deciding which flights to cut was a “fine balance to strike”, Ravishankar said.
“Everything’s on the table … an international flight consumes a lot more fuel, but also brings in a lot of trade, a lot of tourism.
“It’s a fine balance to strike, and rest assured we’re looking at all of the scenarios.”
While fuel prices could account for two-thirds of the airline’s expected financial result, a third was due to the underlying performance of the business, which was affected by the overall economy, Ravishankar said.
“Within that third, a contributing factor is the fact that domestic demand is soft.”
The airline had $1.3 billion in a combination of liquidity and unencumbered assets – planes they owned outright – and that gave them a “very long runway” to deal with challenges, he said.
“We could go another couple of years and still be okay.”
Plans to acquire two more 787-9 Dreamliners, two A321neos, and upgrades to the interiors of the airline’s 777s were still going ahead.
No mass redundancies were planned, and onboard snacks were “safe”, but they were renegotiating with partners and suppliers generally where possible, Ravishankar told Bridge.
“We’re doing what every household’s doing and making sure we trim our spend the right way.”