Air New Zealand says the Government has agreed to extend until this coming Wednesday two key conditions of the recapitalisation proposal announced last week, which were originally set down to be satisfied by Friday.

Those conditions are: formal confirmation of ongoing support being obtained from the airline's banks and other financiers; and the Government being satisfied as to the extent of Air New Zealand's residual exposures in relation to Ansett.

Air New Zealand says good progress has been made towards satisfaction of both conditions.

In the meantime, Air New Zealand has been forced to cut seven return flights beween Sydney and Los Angeles from its schedule because of reduced demand since last month's terrorist attacks in the United States.

The airline, which received an $885 million bailout from the Government last week, is reviewing all its domestic and international flight schedules.

Air New Zealand's new board of directors will consider management plans for network changes, and possibly job losses, next week.

The decision to cut the seven Australia-US flights was made before this week's recapitalisation deal, an Air New Zealand spokesman told the New Zealand Press Association (NZPA) yesterday.

The flights may be restored if demand improves.

Flights affected are between October 13 and 30. Passengers affected would be rebooked on other Air New Zealand flights, with the airline picking up any additional accommodation costs.

Direct flights between New Zealand and Los Angeles have not been affected.

Air New Zealand's spokesman told NZPA that the flights were affected because of low demand since the September 11 attacks in the US, when hijackers took over aeroplanes and deliberately crashed them into the World Trade Center and the Pentagon, killing up to 6000 people.