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Speaker 1: Back to well. The war and aviation specifically the Middle

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Speaker 1: East is for now largely out of travel, but the

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Speaker 1: fuel issue is real and the prices are real as well.

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Speaker 1: The New Zealand's in the middle of it all. Of course,

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Speaker 1: they were already losing money. They've now suspended their guidance

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Speaker 1: says of this week and put their fears up as well.

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Speaker 1: Nicol Robbie shank as the CEO, and it's back. Well,

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Speaker 1: it's good to see you too. You need this, of course,

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Speaker 1: like a hole in the head. I'm assuming I think

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Speaker 1: the world needs this like a hole in the head.

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Speaker 1: The guidance nobody can blame you for. Do you have

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Speaker 1: any greater insight into what's going on or what could

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Speaker 1: go on than I do or anybody else does?

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Speaker 2: We are? I mean, fuel is one of our biggest

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Speaker 2: input costs, so we've got a whole infrastructure in place

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Speaker 2: within the airline to deal with both fuel price and

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Speaker 2: fuel supply issues. But in a situation like this, you're

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Speaker 2: sort of intelligence sources, if you will, what by and

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Speaker 2: large a lot of people get access to. We are

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Speaker 2: in daily, if not hourly, contact with our fuel suppliers.

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Speaker 2: We're working really, really well with with Wellington on this

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Speaker 2: and staying coordinated, but not exactly knowing what you know

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Speaker 2: to tell. But we are keeping a close eye.

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Speaker 1: What's your bigger problem right here right now? Is it

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Speaker 1: price or is it supply?

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Speaker 2: Right now?

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Speaker 1: It's price, right so you've got supply. Supplies not the problem.

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Speaker 1: You're not running out, that's right, It's just you need

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Speaker 1: to pass it on in some way, shape or form.

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Speaker 1: I'm assuming we've heard quantas and I'm assuming everybody airline wise,

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Speaker 1: all over the world's putting the price up at the moment.

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Speaker 2: Yeah, it's a well trodden path. We all have this

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Speaker 2: almost the same, if not the same playbook in terms

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Speaker 2: of dealing with pray shocks on fuel. So every airline

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Speaker 2: in the world is doing what we're doing.

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Speaker 1: I'm trying to be upbeat about this because I'm reading

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Speaker 1: about the bloke who runs United. He's seeing a huge

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Speaker 1: shift in demand come out of the Middle East and

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Speaker 1: towards him as people move up through the Americas in

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Speaker 1: Asia into Europe. Are you seeing that.

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Speaker 2: I wouldn't characterize it as a huge shift, but we

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Speaker 2: are seeing that. You know, passage into Europe through the

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Speaker 2: US airspace is now the best way of getting there.

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Speaker 2: But we're also seeing demand via Singapore into Europe, for example.

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Speaker 1: Does how much does that counterbalance what you're losing?

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Speaker 2: That's a great question. It counterbalances it by about fifteen

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Speaker 2: to twenty percent.

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Speaker 1: Not enough. If you had more planes, would it help?

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Speaker 1: Could you Is the demand there for more planes, more

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Speaker 1: seats if you had them.

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Speaker 2: That's a great question. And we are looking at deploying

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Speaker 2: capacity where the demand is greatest, and more planes in

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Speaker 2: theory would have helped. But we're also talking about connecting

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Speaker 2: relatively small markets through to Europe and vice versa. And

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Speaker 2: what we're also seeing is demand is quite unidirectional. It's

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Speaker 2: much more Europeans heading back to Europe after their holiday

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Speaker 2: in New Zealand than then the other direction at this stage.

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Speaker 1: Interesting, My guess. This is the thing that fascinates me

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Speaker 1: most is what I've learned out of COVID is people

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Speaker 1: will pay anything to fly. It's experiential. That's what we

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Speaker 1: want in the world. How much will this and what's

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Speaker 1: going on at the moment dent demand or will people

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Speaker 1: simply suck it up?

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Speaker 2: You know, I'm being upbeat about this too. Make I

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Speaker 2: think New Zealand was a great tourism product before this conflict,

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Speaker 2: and I think our stocks have just gone up. It's

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Speaker 2: a good place to come and have a safe, secure holiday.

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Speaker 1: It's got to be good for you. I mean, I'm

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Speaker 1: getting off the subject. But Australia is running at eighty

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Speaker 1: two cents this morning. I mean Sidney to Auckland surely

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Speaker 1: has never looked better at eighty two Australian. Since we're

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Speaker 1: as cheap as chips. That's got to help you as well,

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Speaker 1: doesn't it. You mean us, No, No, we're running at

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Speaker 1: eighty two Australia this morning.

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Speaker 2: I see.

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Speaker 1: Yeah.

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Speaker 2: I mean currency makes a big difference. When we feel

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Speaker 2: wealthier and our dollar goes along way, we do think

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Speaker 2: about discretionary spend like travel demand.

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Speaker 1: The completely separate subjects here is domestic demand, completely separate

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Speaker 1: from international demand. I will fly to Europe, but I

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Speaker 1: won't fly to Blenham.

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Speaker 2: Yeah, they are separate markets as we see it. There's

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Speaker 2: a bit of overlapp of course, when international demand into

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Speaker 2: New Zealand is strong, some of that spills into our

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Speaker 2: domestic network. But domestic demand is by and large it's

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Speaker 2: on market exactly. So when you put the price up

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Speaker 2: ten bucks, does that kill demand or is it not yet? Well,

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Speaker 2: as you know, and we've spoken about this previously, affordability

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Speaker 2: is a real issue and travel has been expensive and

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Speaker 2: keeping fares affordable is a big part of what we

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Speaker 2: do every day in and day out at the airline.

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Speaker 2: So small movements and price do impact demand. And this

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Speaker 2: is the point I make often. You know, our demand,

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Speaker 2: we can't just pass on all our costs directly to

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Speaker 2: our customers. Demand is very elastic and we see that

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Speaker 2: often when you go beyond a particular threshold and what

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Speaker 2: that means to load factors on our flights.

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Speaker 1: Just simply explain because we get a lot of text

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Speaker 1: on this market cracks, jet fuel and hinging, why haven't

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Speaker 1: you hitged? What have you hitged? And what can't you huge?

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Speaker 2: Yeah, jet fuel is made up of two things. One

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Speaker 2: is crude oil, so the oil that gets pulled out

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Speaker 2: of the ground and what's called the crack spread or

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Speaker 2: the cost of refining that crude oil into jet fuel,

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Speaker 2: and jet fuel is the think of it as the

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Speaker 2: most distilled form of crude oil. So it takes more

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Speaker 2: energy to get at a liter of jet fuel out

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Speaker 2: then say diesel. And we have hedged crude oil. So

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Speaker 2: we have got a eighty three percent of our crude

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Speaker 2: oil purchases between now and the end of this financial

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Speaker 2: year are hedged at what roughly we're in the money,

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Speaker 2: I think north of about seventy cents US and what

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Speaker 2: we have not hedged, and it's by and large what

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Speaker 2: most airlines do around the world is hedge the cracks spread.

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Speaker 2: And that's because that hedge is typically unreliable, it's typically expensive,

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Speaker 2: and so it's usual practice not to hedge that component

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Speaker 2: of jet fuel.

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Speaker 1: Okay, the small town concerned, the remains already upset. What

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Speaker 1: would need to happen within the company for you to

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Speaker 1: start pulling roots?

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Speaker 2: Well, I think worth calling out sort of the context

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Speaker 2: of you know, what we're trying to do around root consolidation.

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Speaker 2: Between and end of April, which is the period we're

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Speaker 2: looking at as we speak, we will run about twenty

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Speaker 2: two thousand flights. We will carry about one point nine

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Speaker 2: million customers during that period. Our consolidation that we are

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Speaker 2: releasing over the course of the next twenty four to

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Speaker 2: forty eight hours, sees US reduced the twenty two thousand

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Speaker 2: flights by eleven hundred flights, so five percent reduction and

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Speaker 2: that impacts about forty four thousand of the one point

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Speaker 2: nine million customers that'll be flying on us. And those

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Speaker 2: forty four thousand customers, almost all of them will be

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Speaker 2: reaccommodated or rebooked on a flight on the same day.

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Speaker 2: So that's the context of the of the consolidation that

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Speaker 2: we're running. We will continue to monitor this situation. Fuel

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Speaker 2: this morning as I woke up, was at one hundred

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Speaker 2: and seventy dollars and cracks at seventy six dollars. Usually

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Speaker 2: that's fifteen to twenty dollars. And so this when people

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Speaker 2: use the word unprecedented often this is I think deserves

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Speaker 2: genuinely genuine unprecedented.

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Speaker 1: If things continue. It's the timeline that no one can answer.

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Speaker 1: If this continues as it is at the moment, how

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Speaker 1: long before your company is in real financial trouble.

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Speaker 2: We are really well capitalized as an airline, and so

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Speaker 2: you know, I've learned the sort of essence of this

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Speaker 2: phrase over the last five years as I've worked at

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Speaker 2: the airline. I would suggest we all panic slowly.

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Speaker 1: So nothing to worry about now.

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Speaker 2: Nothing to worry about at this stage, and we've got

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Speaker 2: a lot.

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Speaker 1: Of headroom okay, appreciate your time. Good to see. Thank you.

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Speaker 1: Nicol robershank in New Zealand CEO. For more from the

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Speaker 1: mic Asking Breakfast, listen live to news talks it'd be

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