28 May 2019

Frequency Adjustment

Air New Zealand is reducing flights on domestic routes and reviewing airfares as tourism slows and operating costs rise. An Air New Zealand spokeswoman said from July it would begin making some mostly off-peak frequency reductions on its domestic trunk routes and some regional services. Nelson, Napier, New Plymouth, Palmerston North, Blenheim and Tauranga would all be affected. Some fares were also being reviewed but there was no plan to change lead-in fares on domestic and regional services. "Given the impact of the sustained rise in the cost of jet fuel and the impact of other cost increases in areas such as airport landing fees, we are currently reviewing some fares," the spokeswoman said. In an attempt to stimulate slowing domestic tourism growth Air New Zealand cut entry level airfares by up to 50 per cent on 41 domestic routes in what was described as the airline's biggest pricing shake-up in more than 10 years. The result was more than 750,000 seats a year available for less than $50. On Monday Air New Zealand told investors its full year earnings could be up to $60 million lower than forecast. It was the second time earnings had been revised in 2019. In January it downgraded its earnings before tax guidance to between $340m to $400m. That was down on its 2019 earnings guidance of $425m to $525m, made in 2018. Following the January downgrade the airline launched a company-wide review as it seeks to reduce costs by 5 per cent. Since then Air New Zealand has deferred $750m in aircraft capital spending, and $50m of deferred spending elsewhere.  Air New Zealand's executive team also voluntarily froze their salaries for at least the next 12 months. ​Rising jet fuel costs are forecast to hit hard in the coming year. In mid-May Air New Zealand chief executive Christopher Luxon said increases in fuel price would result in an "eye watering" $200m additional costs this year compared to last year and this was expected to continue into next year. On Monday Air New Zealand announced it was making a multi-billion dollar investment in eight new Boeing 787-10 Dreamliners. The order would give Air New Zealand one of the youngest, most efficient jet fleets in the world, Luxon said.

1 comment:

  1. Everyone starting to feel the pinch. Virgin reduced capacity into AKL only a week or so ago, plus the various other airlines over the past 6-12mths (EK, Air Asia etc).

    Interesting to see how long the slow down lasts