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An Air New Zealand Boeing 767 landing at Auckland Airport. - Source: Wikimedia Commons -
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Air New Zealand is refusing to comment on speculation it plans to cut its daily service to London and slash jobs as part of its bid to turn around loss-making parts of the business.
Air New Zealand said some months ago that its international operations were losing a million dollars a week for the first six months of this calendar year.
The airline is carrying out a review of its loss-making long haul airline roster and chief executive Rob Fyfe said pulling out of London is an option, the Dominion Post reported yesterday.
But, the airline told the NZ Herald today that the comment
attributed to Fyfe in the newspaper was taken out of context.
The company told ONE News they are looking at a possible new sales
and marketing structure and also new partnerships with other
airlines.
Fyfe did indicate earlier that no stone would be left unturned as it undergoes the review of the business model.
At the same time the airline is completing a review of their corporate overheads. Both of these reviews come with the possibility of jobs losses, but Air New Zealand would not comment on how many jobs would be on the line or if there would be losses associated.
An Air New Zealand spokesman said the strategic review - which was announced earlier in the year - will be completed during the first three months of next year.
Market analyst Paul Valk from Craigs Investment Partners told TVNZ's business programme today that it's no secret the airline is "seeing some pain" on long-haul.
"They have said that they will review that (London) service but I think it would be unlikely to see them cancel it all together," he said.
He told AMP Business that the airline is still feeling the effects of a post Rugby World Cup slowdown for visitors and global uncertainty meaning travel has dropped around the world.
Operating efficiencies
An Air NZ spokeswoman said Fyfe had communicated to staff that the future of flying beyond Hong Kong and Los Angeles hangs on the success of operating efficiencies and the ability to build partnerships to ensure profitability.
The company has daily flights to London through Los Angeles and Hong Kong.
Forsyth Barr aviation analyst Rob Mercer told Fairfax that six months ago the airline was confident given an increase in passengers during the RWC, but the past three months had failed to deliver the expected growth in total traffic and yields had suffered.
Air New Zealand shares fell to their lowest level since mid 2009 yesterday as faltering global economic growth reduced demand for travel and eroded airline margins.
The airline posted a loss of $37 million in its second half ended June 30, when flights were disrupted by earthquakes in Canterbury and Japan, leading to unprofitable compassionate fares for Christchurch residents.
Auckland-based Air New Zealand told analysts and investors last month that it is aiming for a $110m profit improvement by 2015 from long-haul flights, which are now an under-performing part of the company.
Air New Zealand is among businesses the Government has flagged for a sell-down in this term, with the potential sale of a quarter of the shares, reducing its holding to about 50% from 76%. The Government would reap about $252m from the sale at today's price.
Stocks fall
Air New Zealand's stock fell as low as 91 cents yesterday, bringing its decline this year to 39%, having traded at $1.53 in January.
The stock price weakness is in step with regional rivals - Qantas Airways has fallen 37% and Singapore Airlines is down 34%.
"It's a tough environment for all airlines - it is a very hard industry to turn off the cost tap," said Craig Brown, senior investment analyst at One Path New Zealand.
"Airlines themselves are a volatile business, people either love them or hate them."
Air New Zealand's forward bookings have been hurt by economic
uncertainty in a number of markets, rising fuel costs and a slow
recovery in the Japanese market following March's earthquake and
tsunami, according to an investor presentation last month.