Latest / Best of Business / Nikhil Ravishankar: Air New Zealand CEO says airline on the road to recovery following first half financial loss

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Nikhil Ravishankar: Air New Zealand CEO says airline on the road to recovery following first half financial loss · Best of Business

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  Speaker 1: Dressing the newsmakers to get the real story. It's hither
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  Speaker 1: Duper Clan drive with one New Zealand coverage like no
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  Speaker 1: one else.
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  Speaker 2: News Talks B Afternoon in New Zealand has posted it's
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  Speaker 2: half year results and it's worse than expected. The net
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  Speaker 2: loss is forty million dollars. It's prompted Act Party leader
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  Speaker 2: David Seymour to renew calls for the government to sell
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  Speaker 2: its majority steak in the airline in New Zealand. CEO's
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  Speaker 2: Nicol Rabashenka henickel hi hether, why have you made a
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  Speaker 2: loss when Quantus has made a profit of one point
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  Speaker 2: seven billion dollars. Yeah.
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  Speaker 3: Look, it's a tough result for us, but not unexpected
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  Speaker 3: and we'd signaled it. Three things driving that result. One
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  Speaker 3: is our ongoing grounded aircraft challenge that we've had because
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  Speaker 3: of the engine issues. The second is softer than expected
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  Speaker 3: demand recovery, particularly here domestically for US in New Zealand,
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  Speaker 3: and the third is rising costs. Some of those costs
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  Speaker 3: are related to the engine issues. Some inefficiencies in the business.
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  Speaker 3: A lot of them relate to costs around accessing spare
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  Speaker 3: parts for our aircraft. And as you know, and I've
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  Speaker 3: spoken to it about it a fair bit, fees, levees
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  Speaker 3: and landing charges which are inflating above CPI at quite
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  Speaker 3: a significant rate. So really that's what's driving the current result.
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  Speaker 3: But as I said, it's not unexpected and we have
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  Speaker 3: signaled it.
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  Speaker 2: What is it going to take to turn this around?
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  Speaker 2: What do you need to do?
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  Speaker 3: Yeah, look, that's a good question. There are sort of
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  Speaker 3: three big buckets of things that we're already doing. The
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  Speaker 3: first is getting our aircraft backflying. We've eight aircraft parked
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  Speaker 3: up and you know, we've been dealt in unlucky hand
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  Speaker 3: as far as that's concerned. We have two engines on
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  Speaker 3: both our narrow bodies and wide bodies that have issues
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  Speaker 3: global issues. One of two airlines in the world that
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  Speaker 3: are exposed to this issue US in Ana and Japan.
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  Speaker 3: But we've had a bit of a breakthrough so Rolls
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  Speaker 3: Royce the fix that they've finally put into those engines
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  Speaker 3: seem to be working. We're going from about eight hundred
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  Speaker 3: and fifty cycles or takeoffs and landing still about two
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  Speaker 3: and a half two to two and a half thousand.
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  Speaker 3: That's a very market improvement on Pratt and Whitney. Over
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  Speaker 3: the last couple of months we've negotiated a pretty good
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  Speaker 3: deal where we get two of our aircraft back from
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  Speaker 3: them so we can fly those. So by the end
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  Speaker 3: of this year, off that at eight aircraft that are
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  Speaker 3: currently grounded, four of them will be back up and
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  Speaker 3: flying again. This is also the same period where we
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  Speaker 3: get finally the two new seven eight sevens delivered. These
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  Speaker 3: are men have been delivered in twenty twenty two, so
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  Speaker 3: we've been waiting for them for a while now, and
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  Speaker 3: so having those aircraft back means for the first time
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  Speaker 3: in six years, we can start thinking about growth. And
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  Speaker 3: for an airline like us, growth is everything. We do
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  Speaker 3: need to grow to make sure we can distribute the
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  Speaker 3: cost fixed costs we have, we can put more capacity,
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  Speaker 3: we can go to new places.
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  Speaker 2: So is that the first one.
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  Speaker 3: That's the first one?
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  Speaker 2: What are the two other buckets?
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  Speaker 3: The second thing is, in my first week I've asked
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  Speaker 3: the business to we're basically doing a strategic reset, so
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  Speaker 3: we're reviewing all parts of the business.
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  Speaker 2: Does that mean you're reviewing routes we are would you
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  Speaker 2: if you found that there are roots that are unprofitable,
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  Speaker 2: and there are definitely roots that are unprofitable, yes, do
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  Speaker 2: you want to cut them?
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  Speaker 3: Well, we run a full service network, so every full
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  Speaker 3: service airline in the world has a spread of routes
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  Speaker 3: as far as profitability is concerned, so we look at
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  Speaker 3: individual profitability of individual routes, but we also look at
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  Speaker 3: the network effect of having that route in place, Does
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  Speaker 3: it feed another more profitable route, et cetera.
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  Speaker 2: Yep, But by and large.
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  Speaker 3: We'll be taking a look at every route and making
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  Speaker 3: sure that as a network, the whole thing happens.
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  Speaker 2: Do you prepare to cut roots?
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  Speaker 3: Snuckle that We do that as general course of business
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  Speaker 3: all the time, and we'll continue to keep doing that,
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  Speaker 3: you know, as any airline needs to do.
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  Speaker 2: Okay, years you've got your hand like you want to
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  Speaker 2: say something else.
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  Speaker 3: Well, the other thing, I think that's very important, and
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  Speaker 3: you and I have talked about this previously, and that's
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  Speaker 3: the third bucket is you know, a New Zealand does
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  Speaker 3: well when we fulfill one fundamental promise we have for
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  Speaker 3: our customers, which is punctual service. So a lot of
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  Speaker 3: focus is going into making sure that our operational performance
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  Speaker 3: is really where it needs to be, because I mean,
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  Speaker 3: that's your point of difference with Jetstar totally.
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  Speaker 2: Has David Siemore got a point here when he says,
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  Speaker 2: go woke, go broke? Have you guys got yourself a
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  Speaker 2: little too distracted by all that kind of nonsense?
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  Speaker 3: Look, I get it. It's politics.
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  Speaker 2: No, it's not politics, nical, it's a customer experience. The
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  Speaker 2: customer experience is that you go into the Coru club
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  Speaker 2: and I mean this sounds petty, but it's important. You
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  Speaker 2: can't even take a paper cup with your coffee you're
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  Speaker 2: in a rush. You can't even take the paper cup
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  Speaker 2: with your coffee onto a plane where they give you
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  Speaker 2: another pap cup on a plane. Right, And this is
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  Speaker 2: about the environment, that kind of stuff, because what happens
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  Speaker 2: there is it reduces the premium offering that you've got,
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  Speaker 2: which means but by eventually the Corral Club doesn't matter.
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  Speaker 2: You just start flying Jetstar. Right? Has that kind of
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  Speaker 2: stuff tripped you up? Worrying about an electric plane you
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  Speaker 2: don't even you've been trialing it, you don't even know
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  Speaker 2: how to deploy it in your fleet. Worrying about sustainable
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  Speaker 2: aviation fuel all the time, which is miles more expensive
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  Speaker 2: than what you're paying for general fuel. Is all of
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  Speaker 2: the stuff tripping you guys up when you should just
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  Speaker 2: be focusing on flying the existing planes.
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  Speaker 3: No, it's not distracting us. I know from the outside
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  Speaker 3: it might look like it might be distracting us. I
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  Speaker 3: can assure you as the CEO of the company, it
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  Speaker 3: is far from distracting us. I think the point you
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  Speaker 3: make around getting back to the fundamentals of the business
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  Speaker 3: is a very important point. You know, as far as
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  Speaker 3: our customer experience is concerned, Knowing the key customer segments
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  Speaker 3: that we serve and making sure that our offering is
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  Speaker 3: aligned to them is very important. We are world renowned
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  Speaker 3: for our unique cliq Kiwi service and we are great
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  Speaker 3: at it, but that's not something we can take for granted.
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  Speaker 3: So a lot of our focus in this next phase
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  Speaker 3: is going into how do we refresh our service proposition?
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  Speaker 3: Do we have the right product on board. That's why
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  Speaker 3: coming into this role, I've also extended that retrofit program
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  Speaker 3: where we're putting new seats and new galleys and new
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  Speaker 3: screens and so on. Yeah, also into our triple seven
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  Speaker 3: product because on the wide body fleet, you know, having
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  Speaker 3: a world class product on board our aircraft is mission critical.
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  Speaker 2: Yeah, stuff that works and isn't broken, which is what
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  Speaker 2: people are complaining about. Okay, So if you're doing all
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  Speaker 2: the stuff that's going to turn it around, does this
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  Speaker 2: mean it'll be a profit next year?
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  Speaker 3: The road to profitability is one where you know we
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  Speaker 3: will you will see huge improvement in business performance next year.
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  Speaker 3: But really what we're aiming to get to is anywhere
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  Speaker 3: between six to eight percent EBIT margin.
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  Speaker 2: So this doesn't sound like it's a profit next year.
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  Speaker 2: When is your goal for a profit?
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  Speaker 3: Well, we will start to be profitable from next year
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  Speaker 3: if everything goes to and you know, we are working
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  Speaker 3: in an environment where we don't control all of the variables.
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  Speaker 3: That's why you see me advocating as often as I
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  Speaker 3: do for a fair, affordable, future fit aviation system for
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  Speaker 3: New Zealand for example. So those things we don't control ourselves,
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  Speaker 3: and we can't pass all of those costs onto our customers.
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  Speaker 3: So we do need everyone around who participates in the
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  Speaker 3: system to tighten their belts and make sure that we
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  Speaker 3: do have the right aviation system settings. That said, you
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  Speaker 3: know we think that over the next two to three
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  Speaker 3: years we're well on our part to recovery. One of
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  Speaker 3: the key reasons I say that so confidently is for
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  Speaker 3: the first time in six years, we've got new aircraft
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  Speaker 3: coming back into the fleet and we're solving engine issues.
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  Speaker 3: Trust me, everyone of my eleven and a half thousand
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  Speaker 3: colleagues have been waiting for the day where we stop
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  Speaker 3: talking about engine issues. We're sick and tired of it.
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  Speaker 2: Nicol, thank you, Tom appreciated Nichol revshank In, New Zealand's
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  Speaker 2: Chief executive.
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