Air NZ fares on rise to cover fuel costs

Air New Zealand chief executive Christopher Luxon has confirmed price increases on domestic routes of between 4 per cent and 8 per cent, plus a $10 increase on fares to Australia, due to rising fuel prices.

‘‘Every dollar increase you see for fuel costs us about $11 million. Last year we had a wall of $200m cost increases,’’ Luxon said.

‘‘We have hedging and can lock in prices for six months so don’t have to change every day. It’s not something we do lightly but we have to make sure we’re covering costs.’’

Luxon told shareholders at the annual meeting in Christchurch yesterday how the company was reducing disruptions from longhaul engine problems.

The airline’s biggest challenge was unscheduled maintenance issues with the Rolls-Royce Trent 1000 engines that power the 787 Dreamliners.

Air New Zealand will stop flying to Vietnam next year, suspend services to Haneda in Tokyo, and reduce the frequency of flights to Argentina and Taipei. The decisions would free up capacity. It had been a tough year but the company still scored highly as a most trusted company in surveys, he said.

The problems associated with rescheduling more than 3500 weekly flights was estimated to cost $30m to $40m – to be deducted off the forecast pre-tax earnings expected for 2019 of between $425m and $525m.

Luxon said he would meet with Rolls-Royce management in London in a few weeks to seek reassurance everything was being done to get engines back in service as soon as possible. To cope with the reduced fleet, the airline has had to lease three aircraft from two other airlines.

Another issue disrupting operations was the significant increase in people passing through airports in New Zealand.

Luxon said some airport facilities, especially in Auckland, were struggling to keep up with the surge in demand for air travel due to underinvestment by the airport companies. He said he was working with the chief executives of several airports to accelerate improvements.

Customers had also expressed frustration about contact-centre call wait times, especially during periods of weather disruptions.

The company was in the process of hiring a further 80 contactcentre employees and had committed to expanding the selfservice options.

In spite of all the problems the airline posted a near-record profit after tax of $390m, up 2.1 per cent on the previous year.

Shareholders have received a total ordinary dividend for the year of 22 cents a share, an increase of 4.8 per cent.

Luxon’s annual pay was $4.1m, including performance bonuses.