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"Hitting the threshold": Malaysia Airlines and Air New Zealand announce cutbacks

20-Oct-2005

SYDNEY (Centre for Asia Pacific Aviation) - Air New Zealand’s new CEO, Rob Fyfe, issued a profit warning and foreshadowed significant cost cuts just one week into the job.

The carrier’s 2006 pre-tax profit outlook was slashed by more than half to NZD100 million (worse than the 40% drop predicted earlier).

Worryingly, Air New Zealand stated that its recent surcharge increases were a “primary driver” of the revised outlook. Mr Fyfe stated, “there is some price elasticity there and you tend to feel that as a surcharge impost gets higher you begin discounting underlying fares to maintain loads on the aircraft. We're seeing that we're hitting that threshold now, so you get some leakage in your ability to retain the fuel surcharge”.

Air New Zealand is also considering outsourcing its widebody maintenance, cutting up to 600 positions. MRO providers in China and other low labour cost markets will be scouting for the business (Air New Zealand will take a decision in Dec-05). It follows a big win recently by AMECO for United Airlines' B777 heavy maintenance.

Meanwhile, Malaysia Airlines announced that plans to launch services to new destinations this Winter, such as Amritsar, Cochin, Fuzhou, Guilin and Shenzhen will be deferred indefinitely, as part of the national airline’s efforts to contain its cost growth and improve performance.

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