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Air NZ to cut jobs as earnings slump 71%

Air New Zealand says its started on a recovery plan to clawback profits after a disappointing half-year result today.

That includes eliminating 441 jobs -- 175 of those will be made redundant.

The airline has just revealed pre-tax earnings fell 71% to $33 million for the six months to December 31.

Net profit was $38 million, down $60 million or 61% from the same time last year. However, operating revenue was 2.5% higher at $2.3 million.

In its presentation to analysts the airline noted passenger numbers fell 0.6% from 6.8 million to 6.75 million and fuel accounted for -$173 million in the airline's changes in profitability. 

Outgoing chief executive Rob Fyfe says the price of jet fuel has doubled over the last three years and the weak global economy has made it difficult to pass on the higher costs to passengers.

The airline was moving quickly to address the earnings slump and plans were underway to improve profits by more than $195 million a year by 2015.

That includes job cuts.  The airline will remove 441 jobs from the airline over the next six months.

About 175 positions would be made redundant and consultation with affected staff was to begin this morning, Mr Fyfe said.

The balance of the positions would be exited through non- replacement of roles or non renewal of contracts, of which 193 have already been achieved.

While trading conditions remain uncertain and fuel prices stay high, the airline says matching last year's full-year result (net profit of $81 million), will be difficult.

Air New Zealand chairman John Palmer says the operating market is extremely difficult at present, squeezing profits.

“The airline has enjoyed a solid performance from the domestic network including benefits from the Rugby World Cup and improved market share on the Tasman, but the international long- haul network continues to face a challenging time in the European and Japanese travel markets.
“The balance sheet remains strong and is reflected in the board’s decision to declare an interim dividend of two cents per share,” says Mr Palmer.

More news is expected from Air New Zealand in the weeks ahead as a review of its  international network is wrapped up. Mr Fyfe said the review's focus had been strengthening the Pacific Rim network.

Air New Zealand shares  (AIR) closed down 2.25% at 87c today.

Mr Fyfe resigned from the airline in January, after seven years in the job.  He has not yet revealed what he plans to do next.

More by Georgina Bond

Comments and questions

A very sobering read. No wonder Fyfe is off.

Air NZ will not be fixed until it has a change of management from board level down. There is no leadership, there is no strategy, there is no aggressive growth governance. Any insider will tell you there is massive over staffing at middle management level, and in many key positions there is a lack of intellectual capital. There are winners and losers in the airline industry, and all Air NZ's CEO does is blame everything from SARS, to the GFC, to earthquakes to carbon taxes. The last thing shareholders ever hear is him taking accountability and coming up with a plan to expand the airline and make money. John Borghetti could teach Fyfe a thing or two.

Anonymous @ Friday, February 24, 2012 - 9.20am, you clearly have no idea what a strategy is yourself let alone how hard it is to be a ceo rock star.

You have to paint a plane black, have a pedo puppet, hire Trelise, get rid of 747s, hire a social media troll-force to watch out for non-conformist negative types like you, wear anything you like so long as its pink, and have more HR staff than there are passengers .

That's a winning strategy.

Now it all falls into place...

No wonder the airline is not on the government's disposal list. John Key only wants to sell companies that make a profit for the country - let's keep the non-performing ones.

airlines is a tough game, no doubt. How much more 'cost reduction' can Fyfe do though. I would say he is doing a good job if he holds costs flat.

Still a rock star CEO?

Airlines. Peakoil. The two are pretty much mutually exclusive. Get used to it.

AirNZ need to drop the so called 'quality service', I have no good memories of flying AirNZ, and focus on low cost. Drop the flash offices, non-flying/airport staff, marketing and focus on meeting the needs of average ma & pa kiwi.

No wonder all Gov't departments were issued with an edict in Oct that they must fly AirNZ regardless of price.

Can't make money when you have had the RWC? (was not that going to save the NZ tourist economy, the expensive stadiums are totally worth it).

Jetstar clearly is killing them...

Fyfe saw the writing on the wall ,funny he resigned before the results were broad cast, may be he saw something we didnt.

saw the writing on the wall?

he wrote it!

and he'll still keep his bonus i bet

Hell you lot are tough. In a world economy that is tanking, fuel prices trebled, passengers numbers down and he gets a profit! Lots of airlines around the world would love to be in profit. Even the lucky country airline Qantas cannot make a profit at the moment. If he was as cynical as you lot think, he would have resigned and left after last year's result and then he could blame the new CEO for this year's result.

I agree Big Auck. Great to see that we have so many amazingly skilled New Zealanders posting comments on NBR though - I look forward to your talent being used to take Air NZ forward...

Couldn't do much worse than the previous incumbent apparently.

To Air NZ:

I confess a disappointment.

Especially on these reports of your taking on wayward ways. Beware how these manners inflame the senses with drunk misguidance.

However, I have lived long enough now to question when so many others invest such emotion in their disrespect for you.

I can only hope that you continue what you began as the company I knew at 1994. Be that company always, Air NZ, and you will not slip.

And perhaps you will prove this old materialist as you always thought me. A dreamer after all.

oh be quiet aristotle

As someone from the provinces I can say Air New Zealand have been over charging and under providing for years. Additionally Air New Zealand under Rob Fyfe have used every trick in the book to prevent competition, service improvements and new routes. As a result many potential customers are driving and if connecting with international flights are choosing to fly with other airlines.

Ditto, they still like to operate like a monopoly, and haven't realised the world has changed.

Personally I will never fly with Air New Zealand, I don't care they are taxpayer owned, they have screwed the smaller cities/regions for years, no sympathy at all.

At least its made a profit when the majority of airlines around the world are showing huge losses theres so many knockers out there ! Fyfes done an excellent job of Air NZ considering all the challenges the Airline Industry has been through in the past few years.I give the Guy 10/10


Mike, of course you'll give the guy a 10 out of 10, presumably you're an Air NZ staffer and are simply terrified at the prospect of open dialogue for the sake of continuous improvement. Keep up the slogans and party line - it's a great substitute for real management communication and outcomes.

ANZ reminds me of Telecom. They still operate with that monopoly attitude to the punters. They should dump the London stuff and concentrate on Pacific Rim etc How long did it take them to realise that a direct route to Bali would be a winner.?

Totally Agree

Maybe all you Air NZ haters should venture overseas and experience the quality of other airlines. They've won best airline in the world 2 years in a row which is no small feat against the mega carriers. ANZ product is superior and the pricing is commensurate.
While your at it look up the cost of jet fuel prices and it's increase over the past few years. Budget carriers are not making money. ANZ offers great fares with grabaseat, and is competitive with the likes of Jetstar and virgin.
By the way Jetstar is Australian subsidiary of Qantas, so go fly other cattle class airlines or start showing some pride and patriotism and get in behind our small award winning national carrier and help take on the world dominators like emirates and cathay. I applaud ANZ for their innovative stance in the current world climate

Friendly Skies, i haven't seen any Air New Zealand haters in here. I've seen customers and shareholders providing feedback on their expectations in a canidid and valuable manner. It is that very openness to feedback, and acting upon it, which is why Air NZ may be in the state it's in. From what i hear the airline needs something of a glasnost and some back to basics business sense.

No one cares about internal industry awards...we just want to get to the other country quickly, cheaply and safely. Fully service airlines will die if they don't adapt to the new world. Air New Zealand hasn't.

Can't help but think this result has been made to look more gloomy than it really is in order to prepare cuts for sale by govt. Profit in the current market is still a positive thing. They're dominating domestic and tasman markets, clearly Jetstar is not hurting them one iota. Agree that a longer term expansion strategy is needed to grow the business, Fyfe clearly not the guy for this so time for some fresh blood. Hit by fuel costs outside their own control, otherwise not as gloomy as it could be. How different things might have looked if they weren't on the chopping block!

Unquestionably Rob Fyfe has been good for Air New Zealand but that does not mean he has been good for all New Zealand. He thinks everyone wants to fly to Auckland irrespective of their final destination.

When competition arrives drive them out with fare and service manipulation. Look at Kiwi Air and their services from Hamilton and Dunedin to Australia, Pacific Blue and direct Christchurch - Rarotonga flights, Origin Pacific and Hamilton Christchurch direct services. If everything else fails try code share or buy shares.

To Mike, the profitability comes mainly from monopoly domestic services. To friendly skies there are worse airlines and for the non first class traveler better airlines. Try getting grab a seat from provincial to Australia. Not so great!

Agreed, Air New Zealand has ignored the rest of New Zealand, Auckland aside...

I also question whether tourists want to fly into Auckland, or perhaps whether they would if they had a choice. I don't meet many that aren't bored there within a couple days

Thats because Auckland rules !

Keep telling yourself that!

All we hear from Fyfe is hand wringing about Christchurch meaning numbers have dropped. So where is the push to get the numbers from a market that wants to see an earthquake city, to research it and to use it to learn from? Adapt to the market instead of sitting in your flash taxpayer underwritten offices and actually do some real work. That's how you make money.

Provincial, Have you tried the lie flat Economy Skycouch which other airlines are now screaming for, with an all you can eat entertainment system. Pretty good for economy if you ask me. Patent ANZ.
Anonymous, people do care about awards as your not just paying for full service, your paying for the most experienced, safest recognised aircrew and pilots in the world who have the full confidence of the paying passengers they serve. You would be unsettled if you really new who was up the front of a lot of budget carriers.
Agreed competition is necessary and healthy, Origin Pacific was its own undoing with bad management, not ANZ. Likewise Kiwi Air with Mr Wilson.
From what I understand, to yet another anonymous is that ANZ do offer at the end of every flight for people to express their feedback through "My Voice" an online survey so the airline may improve its performance. e.g the removal of an extra row of seats in premium economy so there's more leg room.
P.s I have no idea where the sudden anti-Auckland sentiment is coming from, besides having three to four times the population as the next biggest city, Wellington is International, so is Christchurch, Queenstown and Dunedin, ANZ pulled out of Christchurch-Los Angeles cause no one used it.

The last time I looked I didn't see a lie flat economy sky couch on a provincial flight. The last time I looked you couldn't lie flat in Air New Zealand's so called "lie flat" economy Sky Couch. The last time I looked the "lie flat" economy Sky Couch wasn't making money. Stop believing your own publicity and start returning the cost of capital the taxpayer puts into your airborne gravy train.

Wow, Air New Zealand's comms team working after hours, good on you guys, getting brownie points with the bosses I see.

None of those things you mention have made Air NZ turn (anywhere near!) a profit this year. Perhaps you should concentrate on thigs that do.

As for your nonsense about bad management by Origin and!! You must think we are really dumb to believe your smear PR! Everyone knows Air NZ used those competitors routes as loss leaders to destroy the competition. Give us a break!

Anyway proof is in the figures, like the other bloggers I won't fly Air NZ as I don't support bully behaviour.

Wow, Air New Zealand's comms team working after hours, good on you guys, getting brownie points with the bosses I see.

None of those things you mention have made Air NZ turn (anywhere near!) a profit this year. Perhaps you should concentrate on thigs that do.

As for your nonsense about bad management by Origin and!! You must think we are really dumb to believe your smear PR! Everyone knows Air NZ used those competitors routes as loss leaders to destroy the competition. Give us a break!

Anyway proof is in the figures, like the other bloggers I won't fly Air NZ as I don't support bully behaviour.

ha ha you guys are funny. Peakoil - because of it 50% of airlines will be bust in 5 years.

As an Australian who regularly flies the Tasman and beyond with Air NZ, I have never had a bad experience. Air NZ is a fantastic airline.

For a non-descript country at the bottom of the world you KIWI's obviously don't appreciate the world class innovation and customer service your national carrier offers. Imagine the embarrassment of having Qantas as your national airline ..... then your comments might be relevant.

Your comments as listed only go to prove that all KIWI's are born with small brains and that New Zealand based KIWI's are the least informed citizens of today's world.

"Your comments as listed only go to prove that all KIWI's are born with small brains and that New Zealand based KIWI's are the least informed citizens of today's world."

Finally!! Someone who has articulated exactly why AirNZ is in the crap. It's run by the least informed citizens of the world. Time to stop hiring foreign crew and start hiring foreign management.

wow the air nz pr machine really is losing tonight. first up lots of flag waving and self congratulations to distract from the facts. and lastly a fake post from an 'australian'. keep up the misdirection trolls, hopefully you'll be in the 500 redundancies, but i bet you won't be, cuz Rob would really have nothing to do if you all left.

they did hire some very good quality foreign management in the '99-'02 period. sadly they are all gone now as a result of the many restructures by the current regime. strange that now all senior management are only kiwis.

What has happened to share price under Fyfe? Why do all their analyst reports focus on the fuel price and exchange rates, but the company focus on brand brand brand? When oh when is the brand strategy going to reward shareholders? We have a right to know the answer to this simple question: is the brand strategy going to pay off in (i) more volume; or (ii) higher prices on competitive routes b/c of customer loyalty? or (iii) other revenue benefit? At the moment, the brand stuff (6 years of it?) is simply a cost to us as shareholders. Very tired of the continual focus on PR and image (including of CEO) if it can't be shown to result in any sustainable advantage that benefits shareholders. Given they monooloy price routes like AKl-Napier, it shows how little success they have on any competitive routes like Trans-tasman/LA, or, heaven forbid, a truly competitive route like LA-London. Time for CEO to go and give the company to someone more commercial

I do not understand. How can fuel and exchange rates both be against them? surely if US$ rate has 'worsened", unless they buy their fuel in NZ$, then the "worsening" of the NZ$ must be a natural hedge against the fuel price ? incompetence?

Funny how some like to open their mouths about we thinking their dumb then doing so and removing all doubt. Origin and kiwi failed as above because some of us used to be associated with them so have a very clear understanding.
Being a well travelled kiwi I agree with "staying anonymous"altho I'll overlook his/her general remark throwing us all into the same pot, most kiwis are small brained and uninformed. We have no patriotism or pride in our national carrier as we are so far out of touch with what is going on outside our borders.
Shareholders want large financial gains over a short term which in this industry and current world climate is not going to happen. Those who are well informed will understand and that they have done quite well to turn a profit compared to most other airlines. For the un informed above who accuse of so called bullying, lose the redneck and six fingers and grow some wings, become informed!

Someone could correct me here but did I not just read other income as $92m and a net profit before tax of $54m - Indicating an operational loss of $38m?