1 00:00:00,280 --> 00:00:02,520 Speaker 1: The information provided in this program is of a general 2 00:00:02,600 --> 00:00:05,320 Speaker 1: nature and is not intended to be personalized financial advice. 3 00:00:05,400 --> 00:00:07,760 Speaker 1: We encourage you to seek appropriate advice from a qualified 4 00:00:07,760 --> 00:00:11,600 Speaker 1: professional to suit your individual circumstances. Air new Zealand's profit 5 00:00:11,640 --> 00:00:14,760 Speaker 1: growth has been canceled due to weaker demand for travel. 6 00:00:15,120 --> 00:00:17,800 Speaker 1: How the economic environment is impacting. 7 00:00:17,360 --> 00:00:18,680 Speaker 2: The airline domestically. 8 00:00:19,239 --> 00:00:22,119 Speaker 3: We're still seeing people want to travel for leisure, but 9 00:00:22,200 --> 00:00:25,080 Speaker 3: the market needs to be stimulated for them to do that. 10 00:00:25,200 --> 00:00:27,400 Speaker 3: So what we're seeing is that our average price for 11 00:00:27,520 --> 00:00:29,319 Speaker 3: fears is down a bit on what it was a 12 00:00:29,400 --> 00:00:34,800 Speaker 3: year ago. 13 00:00:45,120 --> 00:00:48,000 Speaker 1: Air New Zealand's just made an annual net profit of 14 00:00:48,040 --> 00:00:51,800 Speaker 1: one hundred and forty six million dollars, down sixty five 15 00:00:51,840 --> 00:00:53,560 Speaker 1: percent on the previous year. 16 00:00:54,120 --> 00:00:55,800 Speaker 2: The result was as expected. 17 00:00:56,120 --> 00:00:59,959 Speaker 1: The airline downgraded its financial forecast throughout the financial year 18 00:01:00,560 --> 00:01:02,000 Speaker 1: as the economy weakened. 19 00:01:02,280 --> 00:01:05,480 Speaker 3: A tougher economic backdrop here in New Zealand has also 20 00:01:05,560 --> 00:01:10,000 Speaker 3: impacted our domestic network, particularly in the corporate government sectors. 21 00:01:10,480 --> 00:01:14,280 Speaker 3: Government spend, for example, is down twenty eight percent versus 22 00:01:14,360 --> 00:01:14,880 Speaker 3: a year ago. 23 00:01:15,240 --> 00:01:19,840 Speaker 1: Costs across the company excluding fuel increased by six percent, 24 00:01:20,360 --> 00:01:24,479 Speaker 1: with the largest increases seen in aircraft operations and maintenance. 25 00:01:25,040 --> 00:01:28,360 Speaker 1: The airline estimates its earnings could have been one hundred 26 00:01:28,440 --> 00:01:32,480 Speaker 1: million dollars higher if it wasn't for inflation. Over the 27 00:01:32,480 --> 00:01:36,640 Speaker 1: past five years, its total cost base excluding fuel has 28 00:01:36,760 --> 00:01:40,759 Speaker 1: increased by twenty to twenty five percent. Over the year, 29 00:01:40,840 --> 00:01:44,320 Speaker 1: it flew sixteen and a half million passengers as it 30 00:01:44,480 --> 00:01:47,440 Speaker 1: increased the number of flights across the group. But the 31 00:01:47,480 --> 00:01:50,800 Speaker 1: slowdown hit hard in the last few months and demand 32 00:01:51,000 --> 00:01:54,920 Speaker 1: is deteriorating, with engine issues outside of its control forcing 33 00:01:54,920 --> 00:01:59,200 Speaker 1: it to ground planes. Capacity will be largely flat going forward. 34 00:01:59,400 --> 00:02:02,120 Speaker 3: You'll be aware of the ongoing challenges we face with 35 00:02:02,280 --> 00:02:05,640 Speaker 3: Pratt and Rolls Royce engines, which means we have a 36 00:02:05,680 --> 00:02:09,400 Speaker 3: aircraft that are just frankly unable to fly. At the 37 00:02:09,440 --> 00:02:14,160 Speaker 3: moment that number is ten for Dreamliners and six air buses. 38 00:02:14,320 --> 00:02:17,919 Speaker 1: It expects this financial year it'll have group capacity at 39 00:02:18,000 --> 00:02:21,400 Speaker 1: ninety two percent of pre COVID levels, but with the 40 00:02:21,480 --> 00:02:25,800 Speaker 1: economic environment so uncertain, the chief executive, Greg fourn isn't 41 00:02:25,840 --> 00:02:29,160 Speaker 1: giving investors any guidance, but he did give me more 42 00:02:29,200 --> 00:02:32,600 Speaker 1: detail on how Earning's look across its network in the 43 00:02:32,639 --> 00:02:35,519 Speaker 1: face of more competition from US airlines. 44 00:02:39,080 --> 00:02:40,760 Speaker 3: Medicine good Warning Group. 45 00:02:41,160 --> 00:02:43,240 Speaker 1: Good morning, Thank you so much for having us really 46 00:02:43,240 --> 00:02:46,600 Speaker 1: appreciate it. Let's talk about that demand picture first, very 47 00:02:46,600 --> 00:02:49,360 Speaker 1: clearly deteriorated in that second half of the year. 48 00:02:49,600 --> 00:02:51,160 Speaker 2: Can you just give us the full picture. 49 00:02:51,400 --> 00:02:54,040 Speaker 1: Was it a decline, was it just softer and what 50 00:02:54,080 --> 00:02:55,520 Speaker 1: do you actually put that down to. 51 00:02:55,639 --> 00:02:58,799 Speaker 2: Other than just a drop off in government demand? Is 52 00:02:58,800 --> 00:03:01,800 Speaker 2: it also people not taking holidays in this corpr Yeah, Look. 53 00:03:01,680 --> 00:03:05,000 Speaker 3: It's a combination of things. What I would say in 54 00:03:05,080 --> 00:03:08,679 Speaker 3: terms of the second half, in terms of demand, we're 55 00:03:08,720 --> 00:03:11,400 Speaker 3: still seeing some pretty good demand out of the US 56 00:03:11,440 --> 00:03:14,480 Speaker 3: to come here, but boy, we've got some extra capacity, 57 00:03:14,600 --> 00:03:18,360 Speaker 3: like over fifty percent more capacity coming in than what 58 00:03:18,440 --> 00:03:22,120 Speaker 3: we've previously had. But demand coming in has been pretty good, 59 00:03:22,200 --> 00:03:26,080 Speaker 3: a little bit softer going out. Domestically, we're still seeing 60 00:03:26,120 --> 00:03:29,080 Speaker 3: people want to travel for leisure, but the market needs 61 00:03:29,120 --> 00:03:31,520 Speaker 3: to be stimulated for them to do that. So what 62 00:03:31,560 --> 00:03:34,120 Speaker 3: we're seeing is that our average price for fears is 63 00:03:34,200 --> 00:03:36,400 Speaker 3: down a bit on what it was a year ago. 64 00:03:37,040 --> 00:03:40,880 Speaker 3: In terms of other areas of domestic you know, government, 65 00:03:40,920 --> 00:03:43,760 Speaker 3: as I mentioned, is down about twenty eight percent on 66 00:03:43,800 --> 00:03:47,920 Speaker 3: a year ago. Corporate and small medium enterprises is down 67 00:03:47,960 --> 00:03:51,680 Speaker 3: about ten to twelve percent. Now, those tend to be 68 00:03:51,760 --> 00:03:55,320 Speaker 3: some of our most profitable categories because people tend to 69 00:03:55,360 --> 00:04:00,000 Speaker 3: buy tickets late and therefore they're paying slightly higher fears. 70 00:04:00,160 --> 00:04:03,640 Speaker 3: So to have each of those sectors down does have 71 00:04:03,720 --> 00:04:07,120 Speaker 3: an impact. Domestically. Cross at Tasmin it's still pretty good, 72 00:04:07,120 --> 00:04:10,080 Speaker 3: and into Asia in parts it's still pretty good. A 73 00:04:10,080 --> 00:04:12,440 Speaker 3: lot of people want to get to Dnpasa for a holiday, 74 00:04:12,520 --> 00:04:15,920 Speaker 3: so we've extended year round. Japan is good. China's a 75 00:04:15,960 --> 00:04:19,039 Speaker 3: bit tougher, so a little bit of a mixed bag. 76 00:04:20,120 --> 00:04:23,360 Speaker 1: You did increase group capacity, but I'm on the other 77 00:04:23,400 --> 00:04:26,120 Speaker 1: side of that, your costs were up as well. Now 78 00:04:26,160 --> 00:04:30,720 Speaker 1: your capacity is constrained because of scheduling challenges. So would 79 00:04:30,760 --> 00:04:33,560 Speaker 1: you say that there's now more impression on airfares going forward? 80 00:04:35,400 --> 00:04:38,160 Speaker 3: What we're saying, if the stage is that certainly for 81 00:04:38,200 --> 00:04:40,839 Speaker 3: the next six months, and you know, we're now a 82 00:04:40,839 --> 00:04:44,080 Speaker 3: couple of months into it, we're seeing similar conditions to 83 00:04:44,120 --> 00:04:48,680 Speaker 3: what we've seen previously. What I see and Richard and 84 00:04:48,720 --> 00:04:52,960 Speaker 3: I our CFO, we're chatting about this with LGN Commercial 85 00:04:53,400 --> 00:04:56,159 Speaker 3: just the other day. It feels like we're sort of 86 00:04:56,200 --> 00:05:00,840 Speaker 3: at the bottom of that cycle. It's a very difficult 87 00:05:00,839 --> 00:05:03,320 Speaker 3: business to predict, but you know, I'm hoping that the 88 00:05:03,360 --> 00:05:06,880 Speaker 3: second half we start to see some green shoots, shoots 89 00:05:06,920 --> 00:05:09,040 Speaker 3: both domestically and even. 90 00:05:08,839 --> 00:05:12,080 Speaker 2: Internationally green shoots. That sounds like upwards pressure. 91 00:05:12,640 --> 00:05:15,320 Speaker 3: We would say, in terms of demand a little bit better. 92 00:05:15,839 --> 00:05:18,800 Speaker 3: In terms of pricing on seats, I don't think you'll 93 00:05:18,839 --> 00:05:21,400 Speaker 3: see too much change to what we currently have at 94 00:05:21,440 --> 00:05:23,680 Speaker 3: the moment for the next six months. 95 00:05:24,000 --> 00:05:27,360 Speaker 1: On yield, can you explain your revenue pro available seat kilometer? 96 00:05:27,680 --> 00:05:30,480 Speaker 1: Where are you making the highest yields on what routes? 97 00:05:30,760 --> 00:05:33,440 Speaker 1: And perhaps where are you making declining yield. 98 00:05:35,279 --> 00:05:38,520 Speaker 3: You know, what I'll tell you is that in terms 99 00:05:38,560 --> 00:05:44,080 Speaker 3: of domestic it's much harder for us. The jets generally 100 00:05:44,279 --> 00:05:48,479 Speaker 3: not too bad across the country. Regional in parts can 101 00:05:48,520 --> 00:05:53,039 Speaker 3: be okay, but in other parts pretty difficult. Across the 102 00:05:53,120 --> 00:05:58,119 Speaker 3: Tasman is not too bad at this stage. America down 103 00:05:58,400 --> 00:06:02,320 Speaker 3: reasonably considerably off the back of over fifty percent more 104 00:06:02,360 --> 00:06:05,680 Speaker 3: capacity in there. So you know, once again, it's one 105 00:06:05,720 --> 00:06:09,159 Speaker 3: of those things that averages don't really tell you the 106 00:06:09,160 --> 00:06:12,000 Speaker 3: whole story. You've got to get into the detail of it. 107 00:06:12,080 --> 00:06:13,760 Speaker 3: But that's how playing. 108 00:06:13,480 --> 00:06:15,920 Speaker 2: Out here count. What's happening with here count. 109 00:06:16,400 --> 00:06:20,200 Speaker 3: We've taken about four hundred people out of the business, 110 00:06:20,320 --> 00:06:23,719 Speaker 3: and that was really in response to wanting to trim 111 00:06:23,760 --> 00:06:27,119 Speaker 3: our sales as we saw the economic conditions. We've actually 112 00:06:27,160 --> 00:06:30,839 Speaker 3: added some back into frontline positions. There's few more cabin crew, 113 00:06:30,920 --> 00:06:33,960 Speaker 3: there's some more engineers where we needed it, but where 114 00:06:34,000 --> 00:06:36,840 Speaker 3: there's areas in the support office functions where we've been 115 00:06:36,839 --> 00:06:40,360 Speaker 3: able to trim. That's what we've been doing. So that 116 00:06:40,440 --> 00:06:44,800 Speaker 3: process is literally complete, and you know that's helped us 117 00:06:44,920 --> 00:06:46,640 Speaker 3: save tens of millions of dollars. 118 00:06:47,040 --> 00:06:49,680 Speaker 2: Your share prices failed to fire since Covid. 119 00:06:49,839 --> 00:06:52,960 Speaker 1: Really it's been under a dollar for the best part 120 00:06:52,960 --> 00:06:56,560 Speaker 1: of three years. If we see a recovery, do you 121 00:06:56,640 --> 00:06:58,080 Speaker 1: expect that to recover with it? 122 00:06:58,960 --> 00:07:02,920 Speaker 3: For sure? You know, it's something that we look at 123 00:07:03,680 --> 00:07:06,960 Speaker 3: as anyone would when you're running a publicly listed company 124 00:07:07,040 --> 00:07:10,840 Speaker 3: like ourselves. But there's a time for everything, and just 125 00:07:10,880 --> 00:07:13,800 Speaker 3: at the moment. If you think about the process that 126 00:07:13,840 --> 00:07:15,960 Speaker 3: we've been through with their New Zealand we go back 127 00:07:16,000 --> 00:07:18,720 Speaker 3: to twenty twenty, we had COVID that went on for 128 00:07:18,760 --> 00:07:20,760 Speaker 3: the best part of two and a half years. We 129 00:07:20,880 --> 00:07:24,280 Speaker 3: then delivered a pretty good result five hundred and eighty 130 00:07:24,280 --> 00:07:27,680 Speaker 3: five million dollars last year, and that's off the back 131 00:07:27,720 --> 00:07:30,360 Speaker 3: of plenty of tail winds. We're now into this year 132 00:07:30,400 --> 00:07:34,040 Speaker 3: with two hundred and eleven million dollars and plenty of headwinds, 133 00:07:34,200 --> 00:07:36,920 Speaker 3: and some of those will be sustained, they'll go for 134 00:07:36,960 --> 00:07:41,080 Speaker 3: a bit longer. The important thing is to understand what's happening, 135 00:07:41,280 --> 00:07:43,880 Speaker 3: if you like, below the surface in the New Zealand, 136 00:07:43,960 --> 00:07:47,600 Speaker 3: what are we doing about improving the airline in terms 137 00:07:47,640 --> 00:07:51,480 Speaker 3: of creating best and better customer propositions And you're not 138 00:07:51,560 --> 00:07:55,120 Speaker 3: spoken about some of those already. Getting those fourteen seven 139 00:07:55,200 --> 00:07:59,040 Speaker 3: eight sevens retrofitted with the latest product is a good investment. 140 00:07:59,560 --> 00:08:03,200 Speaker 3: Building new hangar out at the airport a good investment. 141 00:08:03,280 --> 00:08:05,880 Speaker 3: The other one is fifty years old. We don't want 142 00:08:05,920 --> 00:08:09,600 Speaker 3: to lead some of these infrastructure projects and not invest 143 00:08:10,080 --> 00:08:13,200 Speaker 3: putting in a thirty five million dollar new loyalty platform 144 00:08:13,280 --> 00:08:16,480 Speaker 3: replacing something that was put in nineteen eighty nine, and 145 00:08:16,520 --> 00:08:20,360 Speaker 3: we've now gone and put that in place. So I'm 146 00:08:20,480 --> 00:08:24,960 Speaker 3: very comfortable with the direction of travel. It is frustrating 147 00:08:25,000 --> 00:08:27,560 Speaker 3: with some of these headwinds, and that's why I take 148 00:08:27,600 --> 00:08:29,320 Speaker 3: my hat off to with our team who are doing 149 00:08:29,320 --> 00:08:32,960 Speaker 3: a terrific job you know, having tenty abst planes, that's 150 00:08:33,000 --> 00:08:35,720 Speaker 3: a billion dollars worth of capital sitting on the ground. 151 00:08:36,280 --> 00:08:38,640 Speaker 3: Not every airline has to deal with that because not 152 00:08:38,720 --> 00:08:43,640 Speaker 3: every airline is running Pratton Whitney eleven hundred engines. Half 153 00:08:43,720 --> 00:08:48,760 Speaker 3: our airbus fleet have the twenty five hundred engines. They're 154 00:08:48,760 --> 00:08:51,880 Speaker 3: no problem. It just happens to be that half the 155 00:08:51,960 --> 00:08:55,760 Speaker 3: other fleet has the latest engine, which is a problem. 156 00:08:56,080 --> 00:08:59,400 Speaker 3: Now there's a thousand of those engines backed up trying 157 00:08:59,400 --> 00:09:02,160 Speaker 3: to get in who are into a repair shop around 158 00:09:02,160 --> 00:09:04,400 Speaker 3: the world. At the moment, there are over four hundred 159 00:09:04,440 --> 00:09:09,560 Speaker 3: planes on the ground who run those engines. Some of 160 00:09:09,600 --> 00:09:12,160 Speaker 3: our competitors don't have that problem because they don't have 161 00:09:12,200 --> 00:09:12,880 Speaker 3: that engine. 162 00:09:13,200 --> 00:09:15,440 Speaker 1: It feels like after COVID in New Zealand kind of 163 00:09:15,440 --> 00:09:18,320 Speaker 1: just can't catch a break, right. You said during COVID 164 00:09:18,320 --> 00:09:21,439 Speaker 1: that in New Zealand would be a smaller airline eventually. 165 00:09:21,679 --> 00:09:22,480 Speaker 2: Is that what this is? 166 00:09:22,720 --> 00:09:28,240 Speaker 3: No, I'm very comfortable that we've got good aspirations here 167 00:09:28,240 --> 00:09:32,160 Speaker 3: for growth, and you know, we have our fingers crossed 168 00:09:32,160 --> 00:09:34,800 Speaker 3: with Boeing that at the end of next year we 169 00:09:34,880 --> 00:09:39,160 Speaker 3: start the delivery of new Dreamliners. Now we hope that 170 00:09:39,160 --> 00:09:42,040 Speaker 3: we're going to have two that is the potential then 171 00:09:42,120 --> 00:09:45,160 Speaker 3: to start exploring new routes. So no, this isn't about 172 00:09:45,160 --> 00:09:47,520 Speaker 3: a smaller airline. It's about an airline that's going to 173 00:09:47,520 --> 00:09:51,000 Speaker 3: be fit for purpose and one that will grow. Just 174 00:09:51,080 --> 00:09:55,320 Speaker 3: at the moment because of circumstances that not everyone is 175 00:09:55,360 --> 00:09:58,560 Speaker 3: dealing with, we're having to sort of double down and 176 00:09:58,679 --> 00:10:01,839 Speaker 3: work extra har because we've got a billion dollars where 177 00:10:01,840 --> 00:10:02,880 Speaker 3: it's the fleet we can't use. 178 00:10:03,960 --> 00:10:17,160 Speaker 1: Thanks a much trigger for shut it, no problem.