Amid the unprecedented times the country is facing, New Zealand’s national airline has had to make some difficult decisions.
Air New Zealand has had to cut more than 95 percent of its flights here in New Zealand and around the world. As a result, it is beginning the difficult process of reducing the size of its work force.
Before the Covid-19 outbreak, Air New Zealand had annual revenue of around $5.8 billion and made a profit of $374m in the last financial year. The company also had around a billion in the bank in case an unexpected event hit.
The global reduction in air travel has hit Air New Zealand hard with the airline earning less than $500 million revenue annually based on current booking patterns. This means the company is dealing with a significant reduction of over $5 billion in revenue per year.
“While we are expecting at least domestic bookings to increase again once the Level 4 Alert has been lifted, the harsh reality is that most countries (including New Zealand) will rightly take a cautious approach to opening their borders again,” the airline explained in statement.
“International tourism flows make up around two thirds of Air New Zealand’s revenue, which means the lack of incoming tourists has flow-on effect on our domestic network. In that light, it is clear that the Air New Zealand which emerges from the Covid-19 crisis will be a much smaller and largely domestic airline with limited international services to keep supply lines open for the foreseeable future.”
Air New Zealand currently employs around 12,500 people around the world. Given the airline’s operations will be much smaller for some time the company has predicted that in a year’s time it will be at least 30 percent smaller than it is today.
“We have been collaborating with our Unions and our Air New Zealanders to explore how together we can reduce costs of running our airline. Many Air New Zealanders have offered too take leave without pay, reduce their hours or explore voluntary exits.”
The company explained it had already made savings from voluntary pay cuts by the board of directors, the chief executive officer and the executive team.
Given the airline is expected to be at least 30 percent smaller it will need to reduce the size of its workforce by up to 3500 roles.
“This week we have begun the process of consulting out large-scale workforce reduction in our international regions. New Zealand will follow. These are painful but necessary measures to ensure this country retains its national airline in the long term.”
The company has assured its commitment to supporting affected Air New Zealanders as they transition out of the business, including exploring redeployment opportunities.
“These are unprecedented and challenging days. However, I am confident that by taking the necessary measure now, Air New Zealand will get though this difficult situation and one day returns to serve all our destinations at home and many more around the world,” concluded Air New Zealand CEO, Greg Foran.