Air NZ to unveil lean machine

By DANIEL RIORDAN and CATHY ARONSON

Air New Zealand plans to unveil its new-look domestic and short-haul international services next week.

The airline's full board met yesterday and is likely to have considered the changes - the product of several months' planning - and signed off on them.

Unions are scheduled to meet airline management on Tuesday when they expect to be told of the changes.

The airline's budget arm, Freedom Air, will have a place in the new strategy, despite speculation it could be absorbed into the parent.

Air NZ spokesman David Beatson said Freedom was well placed to fight off potential budget entrants - including Virgin Blue and proposed start-up Jump Airlines - and there were no plans to change its domestic operations.

Jump, backed by European investors, claims it will offer fares as low as $39 on main trunk routes when it starts flying in March.

Beatson said Air NZ had no plans to lower fares to anywhere near that level. He doubted such prices could be sustained.

The options Air NZ has been considering on its short-haul services (flights of less than four hours) include doing away with business class - which requires one flight attendant for every eight passengers - and inflight meals.

If services are downgraded, up to 70 of the 300 short-haul cabin crew could lose their jobs - Air New Zealand uses at least one more flight attendant on a Boeing 737 than required by Civil Aviation Authority standards.

Cabin crew were offered a $10,000 exit package at the beginning of the month and about 80 staff had applied for it when applications closed on Wednesday.

Flight Attendants Association executive officer Terry Law said those already contemplating leaving would have taken up the offer, but most of his members who had worked longer than seven years would get a more generous redundancy package and were waiting for the airline's announcement.

Air New Zealand has made more than half its target staff cuts of 800 by the end of June, most of them in management.

Council of Trade Unions secretary Paul Goulter said the unions had helped Air NZ to shape its new policy and were against a budget airline.

"They can't squeeze customer demand into the supply."

He said the changes were inevitable, but the unions hoped there would be a suitable transition time.

"It's going to have a knock-on effect and impact on everyone to a lesser or greater degree. For instance if frequency is increased there may be more pilots, but the baggage handlers will have a larger load."

Travel Agents Association president James Langton said his industry was sanguine about the possibility of the airline dropping full-service domestic flights, but he did not expect meals or business class to be dropped from transtasman flights.

The industry is also expecting Air NZ to announce changes in the way it pays travel agents for selling tickets.

Although the airline has also been reviewing its long-haul strategy, that work will intensify once its short-haul framework is in place.

The airline has focused on short-haul routes because they represent the core of its business and are most attractive to competitors.

Qantas is expected to lift its presence here in the next month or two with extra planes to supplement those flying the main trunk, at airfares Air NZ considers constitute predatory pricing.

Virgin Blue has been so busy making money in Australia its New Zealand plans appear to have been put on the backburner.

Meanwhile, Beatson said the board had made no decision on either the nature or timing of a rights issue, which is expected to be around $200 million.

The Government, which owns 82 per cent of the airline, has indicated it would prefer to contribute the extra $150 million it has pledged if needed as part of a rights issue available to all shareholders.

Beatson said the airline had had no indication of any change to that stance.

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