Key Points:

Air New Zealand is cutting 200 full time jobs in a bid to save in excess of $20 million a year.

The majority of the redundancies would be achieved on a voluntary basis, said chief executive Rob Fyfe. The company employs about 11,000 people.

The airline is cutting up to 100 long haul cabin crew positions, six jobs in recruitment, seven jobs in airline operations and 68 jobs in technical operations. A small number of redundancies are also expected at subsidiaries, including Safe Air in Blenheim.

"We've done a good job over the last four or five years growing this airline, and, in fact, we've created 1000 new jobs and that makes it all the harder when we find ourselves in a recession," Mr Fyfe said on Radio New Zealand.

He did not rule out further redundancies.

Planes are simply not flying as frequently. Capacity in the airline's long haul business is 8 per cent lower than last year.

Mr Fyfe said there had been a significant downturn in inbound tourist numbers and inbound visitors account for 70 per cent of the passengers on long haul services.

It costs about $100 million a week to run to Air New Zealand. The business has a 5 per cent profit margin.

"When we see seats without passengers on them we have no choice but to put those aircraft on the ground."

The airline had parked one 747 up and another aircraft would join it by early next year.

The airline's share price fell 2c to 89c today. Analysts said the cost savings were welcome but a larger issue was the airline's fuel bill.

"Our fuel bill this year will be a couple of hundred million dollars higher than it was last year," said Mr Fyfe.

This was based on the current fuel price.

Generally a falling New Zealand dollar increases the cost of fuel purchased in US dollars.

Air New Zealand has previously said it has hedged 95 per cent of its 2009 US dollar operating cash flow exposure and 60 per cent of its 2010 exposure at US76c. That is much higher than the current level of the NZ dollar, which was US55c today.

Mr Fyfe would not be drawn on dividend policy going forward.

The number of passengers carried on Tasman and Pacific routes by the airline fell by 10 per cent in September from the same month last year and the passenger load factor fell 7 percentage points to 71.6 per cent.

The airline carried 1.199 million passengers in the month, down 4.5 per cent on the same month last year.

Mr Fyfe said the airline had been working hard on a series of initiatives to minimise the need for redundancies.

"These include pilots taking leave without pay, giving staff on individual contracts the opportunity to work fewer hours, introducing part-time hours for cabin crew, not replacing non-safety sensitive roles, not renewing temporary contracts and a freeze on executive salaries," Mr Fyfe said.

But it was not enough.

"A hallmark of Air New Zealand's success over recent years has been our ability to be nimble, adapt our business to market conditions, contain costs and simultaneously invest in innovative products and services to better meet the needs of our customers.

"We will continue to be relentless in our drive to deliver an inspiring and uniquely Kiwi experience to our customers at everyday low prices," Mr Fyfe said.

- NZPA