2008-07-25 06:50:03 -
WELLINGTON, New Zealand (AP) - Air New Zealand, which has already hiked fares four times this year, warned Friday it may have to keep lifting fares to cover burgeoning fuel costs.
Chief Executive Rob Fyfe said the national carrier would have to raise fares 20 percent to cover the full cost of fuel increases _
a move that was «unlikely» to happen as it would dry up demand.
«What airlines are having to do at the moment ... (is) raise prices by 3 percent or 5 percent at a time to see how much price increase the market can stand before demand starts to tail off,» Fyfe said, when asked how much fares could rise in the next six to 12 months.
«What we can't achieve through price increases we will have to address through capacity reduction and cost reductions in other areas of the business,» he said.
The company's fuel costs doubled to about 2 billion New Zealand dollars (US$1.5 billion) in the year ended June 30, he told New Zealand's National Radio.
«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,» Fyfe said. «There are no routes that we would consider exiting in total.
In early July the carrier froze salaries of senior executives and halted bonus payments. It also said it was considering freezing hires to slash staff numbers to help compensate for soaring fuel costs and sliding passenger demand.
The airline has about 11,000 staff.
Fyfe insisted Air New Zealand was in good financial shape, saying it could emerge from the current downturn in a better position relative to other airlines.
«The challenge, having said that, is enormous,» he added.
At the end of May the airline lowered its profit guidance for the year ended June 30 because of fuel costs _ its second profit downgrade for last fiscal year. The airline said it expects normalized earnings before taxation and unusual items to be less than NZ$200 million (US$148 million).
Before the downgrades, Air New Zealand said it expected normalized earnings of NZ$268 million (US$199 million). It's due to report its results Aug. 26.
Fyfe rejected a recent comment from Qantas chief executive Geoff Dixon that Air New Zealand was unlikely to survive unless it merged with another airline.
The 76 percent 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.
