Airline survival 'dependent on staff cuts'

By Graeme Kennedy

Friday 17th October 2003

Air New Zealand had no option to its bold restructure and staff cuts without risking stagnation or even survival, chief executive Ralph Norris said after announcing the four-year strategy this week.

"It had to be done due to increased competition and continuing pressures on the worldwide aviation industry," Mr Norris said. "We are not making reasonable returns on our assets and the risk is that if we do not achieve those returns the company gets smaller and smaller and less competitive.

"Without the restructure it would be a matter of survival and the company would have less chance to thrive and we have had to re-evaluate everything we do.

"The transformation team looked at the business and what was needed to improve its effectiveness. They identified using more technology, simplifying processes and stopping doing things we don't have to things that don't add value.

"Given our current volume of business, the team asked what our ideal staffing level would be and they came up with 8500."

Mr Norris said only a small number of jobs would be at risk as most of the 1500 would go over the four years through natural attrition "and that's better than putting 10,000 jobs at risk," he said.

The cuts began at the top with the departure of former chief operating officer Andrew Miller, while the restructure consolidates seven business units to three.

Mr Norris said competition was particularly fierce on the Tasman, with new carriers including Emirates and Pacific Blue adding huge capacity to the routes. He said Air New Zealand had made one small profit on the Tasman in the past six years.

He said changes, including the domestic Express Class and Tasman Express scheduled to begin on October 29, were delivering results. Domestic passenger numbers in the past 12 months rose by a million, the equivalent of five years' normal growth.

He remained hopeful the Commerce Commission would deliver a positive decision next week on the proposed Qantas alliance in which the Australian carrier would take a 22.5% holding in Air New Zealand, although the restructure had been planned with or without it.

"In the big picture, the alliance is an integral part of our forward strategy," he said.

The slimmer Air NZ is designed to ultimately save the company $245 million a year.

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