Air NZ battle plans stay secret as Qantas cuts staff

By SIMON HENDERY and REUTERS

Air New Zealand says it has contingency plans to deal with a war-related slump in business.

But it will not say what they are.

"It depends on what situation arises," a spokeswoman for the airline said yesterday.

In Australia, Qantas is trimming staff levels and warning it may have to make further cuts if a war in Iraq hits the international travel market.

In a memo to the company's 35,000 staff, chief executive Geoff Dixon said Qantas would temporarily cut the equivalent of 1000 full-time jobs by boosting its forced leave programme.

The move follows Qantas's announcement last month that it would cut staffing by the equivalent of 1500 full-time positions by forcing workers to take owed leave.

Last month's cuts were blamed on a fall in bookings of 20 per cent on some routes, including those to Japan and Britain.

International bookings were down 8 per cent overall, and as a result Qantas cut some flights and cancelled non-essential spending.

Dixon's latest memo warned that Qantas would have to make further permanent staff reductions if war broke out in Iraq or if bookings fell further.

"More and more people are showing a reluctance to travel in the existing environment," he said.

He blamed terrorism fears, Iraq and the weak world economy.

"This is showing up quite clearly in forward bookings for all airlines, including our own."

A Qantas spokeswoman could not say yesterday what the impact of the leave enforcement programme would be on the company's New Zealand operation.

A general reluctance to travel will also hit Air NZ, although unlike Qantas, it flies nowhere near the Middle East.

A reduction in forward bookings has plagued the New Zealand tourism industry since the September 11 terror attacks in 2001.

Fears of terrorism and war have changed international holidaymakers' booking behaviour.

More now book trips to New Zealand only weeks, rather than months, in advance, making forecasting more difficult for tourism operators.

But the country's largest operator, Tourism Holdings, said last month that only a prolonged war in the Middle East or a major terrorism attack would knock its full-year profit out of the range being forecast by analysts.

Tourism New Zealand says war has less of an effect on the industry in this country than significant economic events such as the 1997 Asian economic crisis.

Visitor numbers dropped 1.3 per cent after the 1991 Gulf war but rose 9.6 per cent the following year.

Numbers were also up 7 per cent last year, reversing a fall in late 2001 after the September 11 attacks.

* Europe's two largest carriers, British Airways and Lufthansa, have warned that a war could affect traffic volumes by 20 per cent, and both are setting up cost-cutting programmes.

In the Gulf, disruptions to airline service have begun but are expected to be limited.

Airlines are better equipped to use alternative routes than they were during the Gulf War in 1991, industry officials said.

"We have had assurances from Iran and the Emirates that they will keep their airspace open," said a spokesman for IATA, the trade association for the world's airlines.

"People have to remember there are not too many flights crossing Iraq."