Latest / Best of Business / Greg Foran: Air New Zealand CEO on the airline's profit and earnings falling over 60 percent

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Greg Foran: Air New Zealand CEO on the airline's profit and earnings falling over 60 percent · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks that'd be
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  Speaker 1: follow this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: Tough times for Air new Zealand. Net profit after tax
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  Speaker 2: was down sixty five percent on last year to just
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  Speaker 2: under one hundred and fifty million dollars, and earnings before
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  Speaker 2: tax came in at less than half what it was
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  Speaker 2: the previous year. Greeg for is Air New Zealand's chief executive. Hey, Greg,
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  Speaker 2: Hi there, Why are you guys doing so much worse
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  Speaker 2: than quantus?
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  Speaker 3: Well, it's all relative to what you're dealing with at
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  Speaker 3: the time. Is then easy answer to that?
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  Speaker 2: What are you dealing with it? They're not dealing with Well, they.
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  Speaker 3: Don't have the same engines on their planes that we do.
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  Speaker 3: And interestingly, at the moment, if you have a very
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  Speaker 3: new fleet, it's actually a bit of a disadvantage. So
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  Speaker 3: the older planes we've got we're not having to take
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  Speaker 3: engines off and get them all serviced, but the newer
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  Speaker 3: ones we did. Engine issue start well initially with the
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  Speaker 3: Trent you go back to about twenty seventeen, but the
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  Speaker 3: decision to put the Trent rolls Royce was made in
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  Speaker 3: two thousand and four we put it on the first
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  Speaker 3: of the dreamline.
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  Speaker 2: This in the last financial year as well.
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  Speaker 3: It's got worse.
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  Speaker 2: Because they had a better year than you last year
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  Speaker 2: as well. It feels like it's developing into a pass.
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  Speaker 3: Well. The other thing that's happened, Heather, is that it's
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  Speaker 3: not just a trend engine. We're now dealing with six
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  Speaker 3: Pratt and Whitneys which go on our very good air
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  Speaker 3: bus fleet. So right today we've actually got ten planes
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  Speaker 3: or a billion dollars worth of capital that we're trying
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  Speaker 3: to get engines.
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  Speaker 1: R An tell me.
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  Speaker 2: The whole thing is pinned on the engines.
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  Speaker 3: No, the other things that we deal with it are
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  Speaker 3: a bit different. You know, the economy in Australia is
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  Speaker 3: a bit different than New Zealand at the moment. So
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  Speaker 3: that's the second thing. So we're seeing, for example, government
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  Speaker 3: spends minus twenty eight percent, no surprises on that. And
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  Speaker 3: then the third thing that's a bit different is that
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  Speaker 3: we've got about a fifty two percent increase in capacity
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  Speaker 3: from USC Alliance flying in here. So when you add
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  Speaker 3: all of those things up, to be honest, it's worth
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  Speaker 3: probably a couple of one hundred.
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  Speaker 2: Million dollars break out of this. Can you actually beat
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  Speaker 2: this for sure?
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  Speaker 3: And the reason the reason I say that is that
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  Speaker 3: the fleet stuff does come right. You know, the supply
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  Speaker 3: chain gets and the economy will cover everyone gets right.
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  Speaker 3: The economy comes right, so that will run.
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  Speaker 2: Come to deal with your competitive stuff, the fact that
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  Speaker 2: you have got this competition issue.
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  Speaker 3: Now, the same way you deal with any competitor, you
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  Speaker 3: ensure that what you're delivering for your customers and your
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  Speaker 3: staff is superior. So you know, give us a couple
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  Speaker 3: of months, we'll have a retrofit completed. We should have
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  Speaker 3: nine completed next year, and then we've got a product
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  Speaker 3: on our Dreamliners which you combine with the Air New
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  Speaker 3: Zealand service. I'll stack that up against anyone. Yeah, you know,
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  Speaker 3: anyone from Australia, anyone from the US, and I'll tell
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  Speaker 3: you we'll deliver a fantastic experience for our customers.
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  Speaker 2: Let's talk about the customer experience, right, which is what
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  Speaker 2: you say would be your competitive advantage. The trouble I
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  Speaker 2: see it at the moment is that the ticket price
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  Speaker 2: is are driving customers away, aren't they? I mean, you
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  Speaker 2: see Jetstar doing really well in the last financial year,
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  Speaker 2: which has got to be a straight switch from more
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  Speaker 2: expensive airlines them. So, and you'll tickets are going to
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  Speaker 2: go up again, aren't they.
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  Speaker 1: Yeah.
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  Speaker 3: Of course, what you're seeing is you're seeing combined results.
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  Speaker 3: You're not seeing jets necessarily separated out between the two areas.
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  Speaker 3: What I'll tell you about Zealand.
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  Speaker 2: See the earnings have gone up twenty three percent.
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  Speaker 3: And it was combined. That's combined. Australia.
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  Speaker 2: Oh yeah, I see what you mean, Ossie and using
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  Speaker 2: So let's let's.
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  Speaker 3: Talk about the market that we operating, because we don't
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  Speaker 3: operate domestically. Actually, our prices are down. So I know
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  Speaker 3: a lot of people on last year, Oh how did
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  Speaker 3: it happen? Because what we're seeing is is no, what
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  Speaker 3: you're seeing is actually a softer market domestically all the
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  Speaker 3: reasons that we just spoke about. Yeah, so you know,
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  Speaker 3: I was looking at the numbers for July so July
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  Speaker 3: this year July last year. We're down three to four
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  Speaker 3: four percent domestically on both turboprops and jets. Same thing
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  Speaker 3: actually across the Tasman and same thing on international. So
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  Speaker 3: pricing actually has come down, and that's one of the
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  Speaker 3: reasons that we're seeing. You know, a weaker profit result.
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  Speaker 2: Do you in despate having to put the prices up again.
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  Speaker 3: Look, so much of that is dependent on demand. So
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  Speaker 3: you know, if the American airlines don't come back next
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  Speaker 3: year at the same level they are now, and you've
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  Speaker 3: just heard me say they're they're up fifty two percent
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  Speaker 3: on where they were previously, that's a lot of extra seats,
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  Speaker 3: then generally what happens is you'll start to see some
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  Speaker 3: movement in pricing. At the moment, traffic between China and
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  Speaker 3: the US is still only operating at twenty five percent
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  Speaker 3: pre COVID, so there's some spere planes around. So you know,
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  Speaker 3: pricing moves around a bit. It's always hard to pick
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  Speaker 3: where it's going. But look, I'm pretty comfortable with where
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  Speaker 3: we're sitting at the moment. There is a good reason,
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  Speaker 3: a good set of reasons as to why our numbers
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  Speaker 3: are what they are and other airlines aren't. Not all
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  Speaker 3: airlines are operating the same planes, Not all of them
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  Speaker 3: are operating in the same.
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  Speaker 2: Economy, Not all.
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  Speaker 3: Of them are dealing with competition.
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  Speaker 2: And three recessions in two years. On the other thing
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  Speaker 2: about customer experience, are you as excited as I am
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  Speaker 2: about being four to report your on time performance to
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  Speaker 2: the government.
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  Speaker 3: We already do.
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  Speaker 2: You report it on your website.
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  Speaker 3: Absolutely, And he's not really parable.
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  Speaker 2: With jet stuff. So I'm into the comparison. But are
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  Speaker 2: you excited about this totally?
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  Speaker 3: By the wise, a rocket And by the way, well,
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  Speaker 3: actually it won't because I already see because I already
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  Speaker 3: see the numbers, Heather, So I know exactly what the numbers.
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  Speaker 2: You've got to do better, though you can't tell me
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  Speaker 2: you're not going to do better.
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  Speaker 3: We always do better, Heather, He don't, and that is
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  Speaker 3: exactly what we do. We actually improved on time performance
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  Speaker 3: last year.
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  Speaker 2: You might have done, but you still have a situation
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  Speaker 2: where as many as one in five of your flights
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  Speaker 2: are running later than fifteen minutes. That's unacceptable.
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  Speaker 3: That's why we're working hard to improve it. But it's
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  Speaker 3: ahead of our actual competitor. So I see those numbers,
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  Speaker 3: I'm not concerned if they're public. As I said, they
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  Speaker 3: already are, and I welcome that. And here's the other
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  Speaker 3: thing that we do. We are incredibly diligent around safety.
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  Speaker 3: So I won't compromise on time performance ever for safety.
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  Speaker 3: And one of the things that I have to acknowledge
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  Speaker 3: is the fantastic job that our people do dealing with
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  Speaker 3: these fleet issues. Heather has us doing it twice. Many
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  Speaker 3: will let me finish it, But.
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  Speaker 2: You're doing a diversion tactic because I want to talk
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  Speaker 2: about it on time performance, because here's the problem, Greg,
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  Speaker 2: is that it feels a little bit like you guys
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  Speaker 2: take us for granted because we're so loyal to you
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  Speaker 2: that if you're an hour late, we just have to
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  Speaker 2: put up with it. Well, is that what's going on.
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  Speaker 3: I'm going to finish and then I'm going to deal
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  Speaker 3: with that.
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  Speaker 2: Okay, can you finish? And then okay?
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  Speaker 3: One of the things our engineers are having to do,
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  Speaker 3: and they're doing a fantastic job in an engineering and mating,
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  Speaker 3: so they're having to do twice as many engine changes
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  Speaker 3: at the moment. So they're working really hard to keep
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  Speaker 3: this fleet going. When you got tenty your best plane
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  Speaker 3: sitting on the ground, you can't fly. On time performance
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  Speaker 3: is as important to us as it is to a customer,
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  Speaker 3: because if you think about it, this whole thing is
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  Speaker 3: a network and a schedule. Yes, the same reason that
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  Speaker 3: I hate cancelations, I really do, because you end up
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  Speaker 3: with the plane and the crew and the wrong places.
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  Speaker 3: So it doesn't suit us to not operate like a
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  Speaker 3: Swiss watch. Always do it with safety, and I can
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  Speaker 3: tell you it is a key priority. We just don't
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  Speaker 3: talk about it. We've got lots of tools out now
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  Speaker 3: out there now that we're doing to help improve the performance.
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  Speaker 3: And it has improved.
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  Speaker 2: And do you think that when you are doing a
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  Speaker 2: straight comparison with Jetstar to MB who's going to publish
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  Speaker 2: this stuff, that you will win every single time.
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  Speaker 3: I can tell you that over the last twelve months.
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  Speaker 3: I think we have run one eight times in the
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  Speaker 3: last twelve months. Okay, and you'll see that I see.
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  Speaker 2: Master of the time. Yeah, okay. Are you are you
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  Speaker 2: of the view which which Grant from Tourism Holdings holds,
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  Speaker 2: which is that if the government puts up the charges
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  Speaker 2: of the visas, we are going to actually repel some tourists.
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  Speaker 3: I'm of the view that and I've learned this over
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  Speaker 3: many years as a retailer that generally the higher the prices,
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  Speaker 3: the less demand. There is few light time.
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  Speaker 2: So are you worried about that?
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  Speaker 3: I am, And I would say it's concerning and it's
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  Speaker 3: it's not just you know, visas and we've seen what's
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  Speaker 3: happened there. There's discussions around the IVL. We've seen CIA
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  Speaker 3: come out in the last few days and say, hey,
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  Speaker 3: we haven't moved prices since twenty sixteen, so you know,
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  Speaker 3: we need to move on this, and we need to
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  Speaker 3: move on that. And we've spoken previously about airport costs
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  Speaker 3: and countering and all those things. The reality is individually,
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  Speaker 3: each can be justified. Collectively, you could be talking three
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  Speaker 3: to four hundred dollars more for someone internationally if they've
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  Speaker 3: got to get a vent and all the other family
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  Speaker 3: right to come in. Yeah, what's that going to do.
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  Speaker 3: It's going to suppress demand.
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  Speaker 2: Okay, smart, not a smart idea.
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  Speaker 3: I think you've got to be really cautious. And I
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  Speaker 3: don't think it's as simple as saying we're going to
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  Speaker 3: do nothing. But I think you have to look at
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  Speaker 3: the system as a whole and you need to say, collectively,
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  Speaker 3: this is going to cause X amount of drop off
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  Speaker 3: in demand or Y amount of drop off in demand,
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  Speaker 3: and then try and thread that needle. My concern at
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  Speaker 3: the moment is that if you're doing it in a
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  Speaker 3: piecemeal fashion, each individual component can be justified, but the
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  Speaker 3: whole is not going to be palatable, So I am
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  Speaker 3: concerned about that.
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  Speaker 2: Okay, me too. One other thing, do you think that
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  Speaker 2: we should limit the number of drinks at the airports
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  Speaker 2: to two?
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  Speaker 3: I can tell you that we in Air New Zealand
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  Speaker 3: do a pretty good job of controlling what people are drinking.
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  Speaker 3: But what if they jump in the in the in
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  Speaker 3: the carou club, Well, our staff deal with that and
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  Speaker 3: they and they deal with that appropriate. And I saw
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  Speaker 3: the I saw the article.
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  Speaker 2: From is he going a bit far making it?
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  Speaker 3: He's trying to make a point And I've met him
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  Speaker 3: and and good on him for doing it. And Michael
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  Speaker 3: O'Leary runs a fantastic business.
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  Speaker 2: Afferent class of passenger, isn't he?
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  Speaker 1: Yeah?
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  Speaker 3: And can I tell you what we see, for example,
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  Speaker 3: on a flight to Balley is a bit different than
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  Speaker 3: what you might get on a flight to LA So
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  Speaker 3: our team deal with it, and you know, if it's
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  Speaker 3: an is shoe will sit down and have a look
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  Speaker 3: at it. I don't think we need to do it
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  Speaker 3: right now.
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  Speaker 2: Fair enough, Greg, thank you very much, really appreciate a
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  Speaker 2: great forum. Chief executive at E in New Zealand.
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