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Why the Air New Zealand share price is up 17% today

Plane flying through clouds
Image source: Getty Images

This week Air New Zealand Limited (ASX: AIZ) CEO Greg Foran released an announcement regarding the airline’s future. It seems as though this update has had a significant effect on the Air New Zealand share price. Foran outlined a plan for the next 800 days and detailed what is to take place for the airline to “survive, then revive and finally thrive”, as he put it. 

Why did the Air New Zealand share price jump today?

The main reason for today’s Air New Zealand share price increase comes from the cost-cutting outlined in the CEO’s announcement. The airline’s survival plan will run until August 2022 and will include additional staff cuts to the 4,000 who have already been laid off. The market has responded positively to news that the CEO aims to cut its wages bill by NZ$150 million.

In addition to staff cuts, the airline has deferred expenditure on new aircraft, hangars and parking. It has also sought savings on supply contracts, leases, executive roles, office space and company vehicles. Mr Foran added that Air New Zealand is “leaving no stone unturned” when it comes to cutting costs. 

The company’s revive phase, which is planned to begin from 1 September, will see a much smaller airline working to recover from the recent coronavirus crisis. Come the 800-day mark the business will enter its “Thrive stage” where digital operations will become a core focus.  The report states that during this phase of the plan, “We will be a digital company that monetises through aviation and tourism in a very sustainable manner.”

“This will be a time where our customers, stakeholders, shareholders and all Air New Zealanders benefit from the hard work and innovation of the survive and revive phases of our journey.”

The Air New Zealand share price is up 126.88% today from its 52-week low of $0.80. 

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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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