March 27, 2019 / 8:11 PM / 24 days ago

UPDATE 1-Air New Zealand launches two year cost cutting plan

(Adds details about review, background)

March 28 (Reuters) - Air New Zealand Ltd said on Thursday it was launching a two-year cost reduction programme and deferred aircraft capital expenditures of about NZ$750 million ($509.78 million) as part of a business review to tackle slowing growth.

The national carrier said it was expecting to achieve an additional NZ$60 million in annualised savings over the two-year period, with the focus on both operational and overhead costs.

Deferral includes a delay by one year on the delivery of three A321NEO aircraft planned to operate on the domestic network, and by two years for one A320NEO aircraft designated for trans-Tasman services, a company statement said.

Air New Zealand revised network growth downwards to between 3 percent and 5 percent, on average, over the next three years, from 5 percent to 7 percent currently.

CEO Christopher Luxon said the steps were taken “to ensure a return to earnings growth in the lower growth environment”.

Softening tourism traffic and weaker domestic leisure travel have hit Air New Zealand’s financials - the airline posted a 35 percent drop in its half-year pre-tax profit announced last month.

In February, Air New Zealand slashed domestic fares by as much as 50 percent in a shakeup of its pricing structure in response to the slackening travel market. ($1 = 1.4712 New Zealand dollars) (Reporting by Aby Jose Koilparambil in Bengaluru Editing by Mark Heinrich)

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