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Air New Zealand passenger numbers declined further on key routes last month, but the airline is in a good position to see off the downturn that has forced larger airlines to slash profit forecasts.
Air NZ has previously warned that the deepening global credit crisis was emerging as a major concern for the aviation industry, and is joining other airlines in cutting capacity to match declining demand.
The airline said today its international capacity was likely to be 13 per cent lower in the fourth quarter than a year earlier.
Demand was clearly weaker across all markets, with the Tasman particularly difficult, chief financial officer Rob McDonald said in a market update today.
In October, Air NZ passenger numbers fell 1.8 per cent on a year earlier, according to its latest operating statistics.
During the month, the airline's capacity was down by 1.5 per cent on a year earlier, while the passenger load factor fell 1.9 percentage points to 76.7 per cent.
The airline also announced the loss of 200 jobs in an effort to save more than $20 million a year.
"Air NZ are just doing what they can to reconfigure their route capacity to maintain relatively high load factors - it's a key part of their strategy," said Rob Mercer of Forsyth Barr.
Passenger numbers on the Tasman and Pacific routes fell by 9.6 per cent last month, and total long-haul passenger numbers fell by 3.6 per cent, although domestic routes saw a 1.8 per cent increase in passengers.
Total yields for the financial year to date were up 6.9 per cent, with short-haul yields up 5.5 per cent and long-haul yields up 10.7 per cent, including foreign exchange impacts.
The declining fuel price was positive, but coincided with softer demand and a lower exchange rate. In addition, with hedging in place it would take some time for benefits to flow through.
Lower passenger numbers would hit profitability, but the airline was in a position to quickly cut costs and did not have to invest heavily in new aircraft and fittings until 2010, Mr Mercer said.
Air NZ had finished reconfiguring its existing fleet about 12 months ago, including new planes for the trans-Tasman route, upgrading its regional fleet and replacing old aircraft.
The airline also had around $1.3 billion in cash.
"Their current balance sheet and market position reflects the work that's been done, and now their emphasis is on just filling out and improving the overall service of what they've got in place, and adjusting their fleet and route services to reflect the softer outlook," Mr Mercer said.
Today, Qantas Airways joined other airlines around the world in slashing its 2009 profit forecast, and said it would further cut capacity.
- NZPA
