TEXT-Air New Zealand says to cut capacity

(The following statement was released by the company) WELLINGTON, May 29 - Air New Zealand will cut group wide capacity for the 2010 financial year by a further three percent in response to reducing demand as consumers tighten their belts in the face of the global economic recession.

The airline today entered into discussions with unions on how to minimise any potential job losses from the cuts, which come off the back of the difficult demand environment confronting the airline for the next six months.

The latest round of changes sees capacity reducing on the Hong Kong-London service from daily to five-days-a-week from mid-October and a reduction in frequency on some domestic routes serviced by the regional airlines.

A review of crewing requirements to meet existing customer demand has identified a potential surplus of up to 40 cabin crew and pilots in regional airline and domestic jet operations.

There may be a further loss of around 40 airport handling roles in Auckland and Christchurch as a result of Qantas terminating its domestic services.

On the Tasman to ensure operating costs and in turn airfares remain competitive the airline is exploring options to address the need for workforce flexibility on the A320 fleet to recognise the demand peaks and troughs of the route.

In line with the capacity reductions, the airline has been reducing the number of staff employed in its corporate centre. These gains have been achieved by the introduction of initiatives such as four-day weeks, leave without pay, pay freezes and a hiring freeze.

Air New Zealand will be strongly lobbying the Government over coming weeks to increase its funding for tourism promotion. The airline shares in the widespread industry disappointment that the Government is yet to increase its support for New Zealand's number one export earner.

The airline believes New Zealand is at risk of seeing its share of international tourism diminish as competing destinations significantly increase their marketing spend and pour further support behind their tourism industries.

While Air New Zealand continues to spend in excess of $100m selling and marketing New Zealand and Air New Zealand overseas, the severe economic conditions and increased budgets from competing destinations are reducing the impact of the airline's efforts.

However, the airline sees strong evidence that people still want to travel - the challenge is to present potential travellers with the right proposition at the right price and that requires investment in marketing and communications.

This investment in marketing will help sustain the tourism industry through this challenging period and help secure the 180,000 jobs dependent on the sector.