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Air New Zealand, which has had to hike prices four times this year due to rising fuel prices, may need to hike them again, chief executive Rob Fyfe said.
To cover the cost of fuel, fares should rise 20 per cent, but he said that was unlikely to happen as demand would dry up.
Fuel costs had doubled to about $2 billion in the year ended June 30, he told Radio New Zealand.
He said the company was also looking at cost cutting and cutting capacity on some routes.
"We'll be doing everything we can to mitigate the deterioration of financial performance on our business," he said.
"There are routes where we may look at reducing capacity if we can't cover our costs. There are no routes that we would consider exiting in total."
He said Air NZ was in good financial share and could emerge from the current downturn in a better position relative to other airlines.
"The challenge, having said that, is enormous."
He rejected a recent comment from Qantas chief executive Geoff Dixon that Air NZ was unlikely to survive unless it merged with another airline. He said the 78 per cent government-owned airline was not involved in any merger discussions.
"A takeover couldn't happen," he said. "I don't believe there is a willing seller of the majority stake."
Air NZ shares were down 3 cents to $1.24 today in a weak market after a strong run up in the last couple of days. They have fallen from $2.69 in August.
- NZPA
