Air New Zealand turns to external consultants to chop million of dollars in costs

Air New Zealand is bringing in outside consultants to look at ways of carving an extra 5 per cent from its overhead costs.

The airline has warned of tougher full year results and last month announced a review of its business.

More details have now emerged of overhead cost cutting, which it describes as a "business realignment project" and which will last for three months.

Regional general manager Asia Scott Carr will spend time in New Zealand leading this over the next three months and is in the process of assembling a project team, which will include external consultants.

An internal document to senior leaders from chief financial officer Jeff McDowall stresses the work doesn't involve a company-wide restructure.

''Our aim is to deliver meaningful, sustainable reductions in our overhead cost base. We're targeting a reduction of 5 per cent in addition to the normal annual cost efficiencies that are necessary to offset the impact of inflation.''

The project is planned to start on May 20 and will run for no longer than three months. At the end, the airline expects to have a set of clear initiatives that are ready to be implemented.

''This cost transformation is a pivotal step towards improving our profitability, so it's imperative we're all aligned on what's required and work together to make the right decisions, and trade-offs, for both our people and Air New Zealand as a whole,'' McDowell has told senior staff.

Last month, chief executive Christopher Luxon said the airline planned to grow it network at between of 3 per cent and 5 per cent a year on average for the next three years - down from a forecast 5 per cent to 7 per cent. This reflected the slower demand growth.

The airline also deferred $750 million in aircraft orders.

Air New Zealand's first-half net profit dropped by 34 per cent to $152m in the first half to December but the airline is sticking with its guidance for the full year, hit by falling demand, higher fuel costs and the fallout from Rolls-Royce engine problems.

In the six months, total operating costs had risen from $2.013 billion to $2.318b.

The company confirmed the full-year underlying earnings between $340-400m, down as much as 40 per cent on a year ago.

It will have to work closely with unions that represent most of its 12,000 staff.

When Luxon announced the review last month, E tū union said it would rather be proactive and address any problems or financial pressures before they get out of hand.

Under an agreement with the unions in March 2015 the company committed to maintaining superior wages and conditions and the unions committed to working to increase productivity. Under that agreement the aim is to have no involuntary redundancies, E tū said.