Air New Zealand warns more flight cuts likely as fuel costs surge

Air NZ chief executive Nikhil Ravishankar spoke to Ryan Bridge TODAY amid the ongoing impact of increased fuel prices. Ravishankar was appointed to the top job at the national carrier in October last year, succeeding Greg Foran. Photo / Michael Craig

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.”

Both domestic and international flights could be affected by the cuts, Air NZ chief executive Nikhil Ravishankar said.

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.”

Mass redundancies aren’t planned, and on-board snacks are safe, but the airline is trimming costs where it can, Air NZ boss Nikhil Ravishankar says.

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.”