THE PRESS FRIDAY, JUNE 4, 1982. Air New Zealand cuts

Press, 4 June 1982, Page 12

THE PRESS FRIDAY, JUNE 4, 1982. Air New Zealand cuts

The act of reducing the staff of Air New Zealand to 6600 by 1985 looks no easier today than it did in April when a United States aviation consultant recommended staff cuts of this order. In the weeks between the presentation of the Colker Report and the airline's own announcement of its intentions, the need for drastic measures to diminish financial losses and to restore profitability has not lessened. In the same period, the determination of the employees’ unions to resist the cuts has undoubtedly hardened. Air New Zealand cannot sweep ruthlessly through its staff, ordering dismissals right and left; the result would be industrial disruptions that would add to the airline’s problems. The first step, to cut staff numbers by 500 within a few months, will be the hardest. If the airline can show in its first staffcutting exercise that it is fair in its redundancy agreements and as reasonable as is possible in handling the process, the next step may be easier for all parties. Much will depend on the capability of the aviation sector and other parts of the travel industry, as well as the engineering industry, to absorb redundant employees. If the business of restoring the airline’s finances were being directed solely at reducing excess staff numbers and the wage and salary bill, the staff unions would have much greater cause for complaint. The airline’s management so far has taken other steps to reduce the costs of its activities. Should it decide to go much further, the problem may not be how to effect staff cuts but how to effect even greater staff cuts than are envisaged at present. Should the airline accede to doing nothing about its wage bill, the question to be faced will almost certainly be how to close down at least the overseas portion of its activities, or so confine them that this week’s proposals for staff cuts would seem to be a very gentle option. For other reasons, such as the assurance that a New Zealand-owned .airline can give to exporters, such a drastic action as abolishing overseas services must be an

undesirable alternative to that of effecting more modest economies.

But for the merger of the domestic and overseas airlines, the day of reckoning for the overseas services might already have been here. The fierceness of competition in a diminished marketplace for overseas travel has put many airlines in a precarious position. Air New Zealand has doggedly tried to match and even surpass other airlines with special fares. This may have helped to maintain passenger loadings; but it has also added to the losses of overseas services. Although domestic services have not prospered, they have been kept afloat by a succession of fare increases that have not been inhibited by competition from other airlines. The merger of Air New Zealand and the National Airways Corporation did not cause the overstaffing problem; the merger merely exposed the problem. Today’s emergency arose not because of the merger but in spite of it. The attrition of staff in the last few years might have been sufficient to allow the airline to continue more’ or less untouched by the hand of redundancy, provided that airline business generally had prospered. Had Air New Zealand not had to face severe competition, the normal losses of staff through changes of job and retirements might have sufficed. Air New Zealand could plead for another alternative to staff cuts. It could ask the Government to subsidise the airline indefinitely through a period of increasing costs and stronger competition. The chances of taxpayers tolerating a charge to subsidise overseas travel are so slim that the idea cannot be seriously entertained. The airline almost certainly faces more difficult months, or years, while the redundancy programme is enacted. This will be disagreeable for all concerned — perhaps even to taxpayers who see what they consider to be very generous redundancy payments being negotiated. None of the other courses of action seems any more agreeable.