Job cuts announced yesterday by Air New Zealand are just the beginning for the company, with serious problems facing the entire aviation industry.
The national carrier announced yesterday 441 jobs will be slashed after its profits dropped 71 percent.
The Government wants to lower its ownership stake in the company from 74 percent to 51 percent, causing further challenges for the airline.
Chief executive Rob Fyfe told APN he could not "preclude" the possibility of more job loses in the future on top of the 441 positions that will be cut by July, which comes after 193 jobs slashed last year.
Peter Harbison, chairman of the Centre for Pacific Aviation, told RadioLIVE this morning the problems facing the aviation industry have been brewing for the past 25 years.
“It’s never been a viable industry. The airline industry overall has never returned its cost of capital,” he said.
Mr Harbison said things are made worse by external factors, like rising fuel costs and a weak economy.
The weak global economy means there is little room to raise ticket prices so instead costs and jobs must be cut, Air New Zealand Mr Fyfe said.
Macquarie Private Wealth spokesman Brad Gordon said it is also happening in Australia.
“Particularly seeing it with Qantas, the competitors are doing that. It's part and parcel with trying to lower the cost base in order to manage in this environment.”
Air New Zealand is currently reviewing its international operation, but has no plans yet to take out any flight destinations.
“There is no possibility that we are looking at today that would see us exit any market that we currently serve,” Mr Fyfe said.
However it may cut the frequency of some flights, while trying to increase flights to markets like the US.
Mr Gordon said there is little prospect that the environment will improve soon.
“Fuel prices are probably going to go higher in the near term. The global economy, well we are seeing some signs of improvement but it's probably not improving quickly enough in the next 12 months.”
Air New Zealand has also begun an international search for its next chief executive, as Mr Fyfe is preparing to leave the airline.
Airline chairman John Palmer says there will be no announcement on who might get the role until the second half of the year.
The airline’s six month net profit, after tax, was down by 61 percent to $38 million.
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