March 15, 2020 / 8:46 PM / 16 days ago

UPDATE 1-Air New Zealand to cut capacity, lay off staff as demand drops

(Adds background on border controls, layoffs, CEO comment)

March 16 (Reuters) - Air New Zealand said on Monday it would further cut capacity and look to lay off some permanent employees as the coronavirus outbreak hits global travel demand.

The capacity reduction comes after New Zealand announced border controls to combat the outbreak by asking all incoming travellers to self-isolate for two weeks.

On its long haul network, Air New Zealand will cut its capacity by 85% in the coming months and suspend a number of routes, including the London-Los Angeles services.

The domestic network would be reduced by 30% in April and May, but will not see any routes suspended, while the company’s directors will take a 15% pay cut until the end of this year.

“It is clear that if we don’t take all the appropriate measures to lower costs and to drive revenue, our airline won’t be in the best position to accelerate forward once we are through the worst of the impact of Covid-19,” Chief Executive Officer Greg Foran said in a statement.

The airline also said “as a result of the downturn in travel Air New Zealand continues to review its cost base and will need to start the process of redundancies for permanent positions.”

Last week, the flag carrier withdrew its full-year earnings guidance, froze hiring and offered unpaid leave to staff because of increased uncertainty over the duration and scale of the coronavirus outbreak.

Trading in the airline’s shares were halted on Monday, with the company saying they would remain suspended.

This would, the airline said, give it more time to fully asses the financial and operational impact of global travel restrictions. (Reporting by Anushka Trivedi in Bengaluru; Editing by Alexander Smith)

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