1 00:00:00,040 --> 00:00:02,240 Speaker 1: In a week where most public companies reported good news. 2 00:00:02,279 --> 00:00:04,760 Speaker 1: In New Zealand was a glaring exception. Of course, National 3 00:00:04,760 --> 00:00:07,480 Speaker 1: carriers losing money forty million for the six months to December, 4 00:00:07,520 --> 00:00:10,840 Speaker 1: worse than expected. It's the usual story engines, grounded planes 5 00:00:10,880 --> 00:00:14,280 Speaker 1: and increased costs. Nicol Ravishank is the CEO anders back 6 00:00:14,320 --> 00:00:14,640 Speaker 1: with us. 7 00:00:14,640 --> 00:00:15,760 Speaker 2: Good morning, good morning. 8 00:00:16,480 --> 00:00:18,360 Speaker 1: So let me ask you this. If you had all 9 00:00:18,400 --> 00:00:20,480 Speaker 1: your engines and all your planes, how different would the 10 00:00:20,520 --> 00:00:21,640 Speaker 1: number be for. 11 00:00:21,640 --> 00:00:27,440 Speaker 2: The first half mic It'd be a ninety million better result. 12 00:00:28,360 --> 00:00:30,360 Speaker 1: But you see that would barely be making money though, 13 00:00:30,360 --> 00:00:30,800 Speaker 1: wouldn't it. 14 00:00:32,240 --> 00:00:36,479 Speaker 2: Yes, the three factors driving the result for us, one 15 00:00:36,520 --> 00:00:42,159 Speaker 2: of them is our engine issues. The two other drivers 16 00:00:42,159 --> 00:00:46,480 Speaker 2: of performance for us as being the fact that we're 17 00:00:46,520 --> 00:00:52,680 Speaker 2: seeing slower than expected demand, particularly here domestically, and cost inflation. 18 00:00:53,680 --> 00:00:56,680 Speaker 2: And some of that cost inflation is related to the engines. 19 00:00:57,560 --> 00:01:02,240 Speaker 2: It's just there's inherent inefficiency and as you know, for 20 00:01:02,280 --> 00:01:07,000 Speaker 2: the last six years, we've we've built a business around 21 00:01:07,880 --> 00:01:10,800 Speaker 2: you know, focused around rebuilding out of COVID and then 22 00:01:10,840 --> 00:01:14,920 Speaker 2: dealing with these engine issues. But there are also other 23 00:01:15,000 --> 00:01:18,560 Speaker 2: cost inflationary issues that we're dealing with, particularly in terms 24 00:01:18,600 --> 00:01:27,920 Speaker 2: of engine sorry, aircraft spare parts and levees, fees and 25 00:01:28,080 --> 00:01:28,920 Speaker 2: landing charges. 26 00:01:29,680 --> 00:01:32,240 Speaker 1: Now read domestic demand. Can you break that down? Is 27 00:01:32,280 --> 00:01:34,679 Speaker 1: that truly domestic? I e. Me and New Zealand are 28 00:01:34,680 --> 00:01:37,280 Speaker 1: buying a ticket or are these tourists coming into the 29 00:01:37,280 --> 00:01:40,399 Speaker 1: country and buying tickets? Because of course tourism, tourism is booming. 30 00:01:41,400 --> 00:01:46,280 Speaker 2: Tourism is booming, and yes we can track that. Tourism 31 00:01:46,400 --> 00:01:50,560 Speaker 2: inbound out of the US particularly has been strong, and 32 00:01:50,600 --> 00:01:52,760 Speaker 2: tourism out of Asia has been strong too. In fact, 33 00:01:53,240 --> 00:01:56,240 Speaker 2: we're very pleased with the fact that, you know, government 34 00:01:56,280 --> 00:02:00,120 Speaker 2: have set policy that sees us looking to go or 35 00:02:00,200 --> 00:02:03,920 Speaker 2: that sector, and particularly as we start to get some 36 00:02:04,000 --> 00:02:06,240 Speaker 2: of our aircraft back and some of those new aircraft 37 00:02:06,600 --> 00:02:10,080 Speaker 2: aircraft being delivered to us, we can't wait to start 38 00:02:10,120 --> 00:02:12,359 Speaker 2: to put our mind to growth something we haven't had 39 00:02:12,400 --> 00:02:15,760 Speaker 2: the luxury of doing for the last six years. 40 00:02:15,520 --> 00:02:18,120 Speaker 1: That lack of domestic demand. I mean, we've got a 41 00:02:18,639 --> 00:02:21,560 Speaker 1: you know, a material turnaround in the economy that will 42 00:02:21,560 --> 00:02:23,440 Speaker 1: flow through to domestic air tickets or not. 43 00:02:24,440 --> 00:02:27,480 Speaker 2: Yeah, that's the expectation significantly. 44 00:02:27,520 --> 00:02:29,880 Speaker 1: But look, because I'm trying to add up the numbers 45 00:02:29,919 --> 00:02:31,639 Speaker 1: here and they don't seem to make any sense. If 46 00:02:31,639 --> 00:02:34,480 Speaker 1: you add the ninety from the engine problems and you 47 00:02:34,520 --> 00:02:36,519 Speaker 1: get some more planes and the economy comes right, you 48 00:02:36,720 --> 00:02:40,000 Speaker 1: still don't seem to be making the sort of money 49 00:02:40,040 --> 00:02:43,120 Speaker 1: other realigns are because travel is booming and in New 50 00:02:43,200 --> 00:02:44,400 Speaker 1: Zealand is not booming with it. 51 00:02:45,040 --> 00:02:50,560 Speaker 2: Yes, I mean domestic is half our business, so it 52 00:02:50,560 --> 00:02:54,200 Speaker 2: would have a significant impact. But also, as I said, 53 00:02:54,320 --> 00:02:56,720 Speaker 2: you know, we've got a business that's been built to 54 00:02:56,840 --> 00:03:00,760 Speaker 2: deal with the post COVID rebuild and and dealing with 55 00:03:00,840 --> 00:03:04,040 Speaker 2: these engine issues. That's why in my first week in 56 00:03:04,080 --> 00:03:06,800 Speaker 2: the job, I've been in the hot seat now for 57 00:03:06,840 --> 00:03:12,400 Speaker 2: four months, I've initiated a business wide review and that 58 00:03:12,480 --> 00:03:16,160 Speaker 2: review is focused on ensuring that we do we set 59 00:03:16,200 --> 00:03:20,560 Speaker 2: the business and get it focused on operating in much 60 00:03:20,600 --> 00:03:23,720 Speaker 2: more of a normalized environment. And that's what we're focused 61 00:03:23,760 --> 00:03:25,200 Speaker 2: on doing this review. 62 00:03:25,200 --> 00:03:27,600 Speaker 1: What specifically are you expecting to come out of it? 63 00:03:27,639 --> 00:03:30,600 Speaker 1: Given I'm assuming all the troubles your company has gone 64 00:03:30,600 --> 00:03:32,120 Speaker 1: through in the last couple of years, you've already had 65 00:03:32,120 --> 00:03:34,359 Speaker 1: a bunch of reviews, and you should already be sharpened 66 00:03:34,440 --> 00:03:36,920 Speaker 1: up from those reviews. 67 00:03:37,200 --> 00:03:44,000 Speaker 2: It's a business that's been built around, basically, you know, 68 00:03:44,480 --> 00:03:47,320 Speaker 2: dealing with some of these engine issues that we've been having. Right, 69 00:03:48,880 --> 00:03:53,440 Speaker 2: One fairly simple way i'd like, you know, I characterize 70 00:03:53,440 --> 00:03:56,400 Speaker 2: it when I speak to my teams is that, for 71 00:03:56,560 --> 00:03:59,360 Speaker 2: very good reasons, we've had to plan not to lose. 72 00:04:00,080 --> 00:04:02,240 Speaker 2: Now we've got to build a business that's playing to win, 73 00:04:03,440 --> 00:04:09,560 Speaker 2: and that is a a refactoring of the business and 74 00:04:09,720 --> 00:04:11,160 Speaker 2: setting it up for the next phase. 75 00:04:11,440 --> 00:04:13,600 Speaker 1: The other problem we haven't talked about lack of planes. 76 00:04:13,800 --> 00:04:16,520 Speaker 1: Are the planes coming? How many and how confident are 77 00:04:16,560 --> 00:04:17,600 Speaker 1: you they'll actually arrive? 78 00:04:18,520 --> 00:04:21,680 Speaker 2: Yeah? Maybe I start with the new planes. As you know, 79 00:04:21,760 --> 00:04:24,880 Speaker 2: we've been waiting for new plane delivery since twenty twenty two, 80 00:04:25,640 --> 00:04:28,279 Speaker 2: and finally this year we're going to get two of 81 00:04:28,279 --> 00:04:30,559 Speaker 2: our new seven eight sevens arrive. So the first one's 82 00:04:31,240 --> 00:04:33,360 Speaker 2: due to arrive here in May and the second one 83 00:04:33,360 --> 00:04:36,360 Speaker 2: in June. And that's been a long time coming and 84 00:04:36,640 --> 00:04:38,600 Speaker 2: we're all very much looking forward to it. It's not 85 00:04:38,680 --> 00:04:41,039 Speaker 2: just great for a New Zealand thrankly, it's great for 86 00:04:41,120 --> 00:04:45,640 Speaker 2: New Zealand. On the engine issues, we've had a couple 87 00:04:45,640 --> 00:04:49,440 Speaker 2: of wins. To Mike, we've as far as maybe start 88 00:04:49,440 --> 00:04:52,920 Speaker 2: with Rolls Royce. The fixes that they've been working on 89 00:04:53,800 --> 00:04:58,960 Speaker 2: is working and so now really the processes is for 90 00:04:59,080 --> 00:05:02,720 Speaker 2: us to get those engines through the shops for their 91 00:05:02,800 --> 00:05:07,120 Speaker 2: maintenance visits, and they are starting to stay on wing 92 00:05:07,240 --> 00:05:11,680 Speaker 2: longer than the previous repairs seem to, so that gives 93 00:05:11,760 --> 00:05:15,440 Speaker 2: us great hope. On the Pratt and Whitney side, we've 94 00:05:16,600 --> 00:05:20,720 Speaker 2: negotiated a new deal which sees us getting one of 95 00:05:20,760 --> 00:05:24,800 Speaker 2: our grounded aircraft back by one April this year and 96 00:05:24,880 --> 00:05:28,279 Speaker 2: a second one by one November this year. What that 97 00:05:28,360 --> 00:05:32,120 Speaker 2: all means is our current grounded fleet of eight aircraft 98 00:05:32,520 --> 00:05:35,560 Speaker 2: will be down to four aircraft and by the end 99 00:05:35,560 --> 00:05:39,480 Speaker 2: of this calendar year that is a big new addition 100 00:05:39,560 --> 00:05:42,440 Speaker 2: to capacity, so we can finally start to think about 101 00:05:42,440 --> 00:05:43,239 Speaker 2: growing the business. 102 00:05:43,600 --> 00:05:47,120 Speaker 1: The retrofits do I materially improve your bottom line? 103 00:05:48,200 --> 00:05:52,880 Speaker 2: They do, particularly as far as our ability to attract 104 00:05:52,920 --> 00:05:55,840 Speaker 2: the right type of tourists into the country, if you will. 105 00:05:56,920 --> 00:06:02,000 Speaker 2: Those retrofits have a high premium product on board, and 106 00:06:02,720 --> 00:06:06,279 Speaker 2: the two new aircraft obviously our premium heavy aircraft, so 107 00:06:06,320 --> 00:06:09,440 Speaker 2: from that perspective they do help with yields. 108 00:06:09,760 --> 00:06:11,440 Speaker 1: And what about the front of the plane? Do you 109 00:06:11,600 --> 00:06:14,200 Speaker 1: have enough investment at the end of the plane? Given 110 00:06:14,680 --> 00:06:17,440 Speaker 1: we see from all over the world. People cannot spend 111 00:06:17,600 --> 00:06:21,120 Speaker 1: enough money wanting to be in business. And first, we've. 112 00:06:20,920 --> 00:06:23,640 Speaker 2: Been investing quite heavily, as you know, on the retrofit 113 00:06:23,680 --> 00:06:26,680 Speaker 2: program and the new aircraft program. We think we do 114 00:06:27,839 --> 00:06:30,680 Speaker 2: and you know, we've got ten new aircraft on order, 115 00:06:31,240 --> 00:06:34,080 Speaker 2: five of which arrive on top of the retrofit program, 116 00:06:34,120 --> 00:06:37,039 Speaker 2: five of which arrive over the course of the next 117 00:06:37,040 --> 00:06:40,960 Speaker 2: twelve months, and that's something that is going to be 118 00:06:42,760 --> 00:06:46,040 Speaker 2: quite an important addition to the fleet. On top of that, 119 00:06:46,880 --> 00:06:49,960 Speaker 2: one of the things I've done, again in the early 120 00:06:50,000 --> 00:06:54,680 Speaker 2: stages of me taking over this role, is approving a 121 00:06:54,720 --> 00:06:57,960 Speaker 2: business case to also retrofit our triple seven planes. So 122 00:06:58,640 --> 00:07:02,440 Speaker 2: by the end of December twenty seven, our entire wide 123 00:07:02,480 --> 00:07:04,880 Speaker 2: body fleet will be on a new product, which is, 124 00:07:05,240 --> 00:07:08,960 Speaker 2: as you say, mission ready to attract, not just in 125 00:07:09,040 --> 00:07:12,720 Speaker 2: front of the plane, across across all three cabins. 126 00:07:13,200 --> 00:07:17,200 Speaker 1: Now, these costs you cite in the report passenger lebes, engineering, maintenance, 127 00:07:17,280 --> 00:07:19,800 Speaker 1: landing charges, all of that sort of thing, how many 128 00:07:19,880 --> 00:07:22,200 Speaker 1: are unique to you? Because there is this just another 129 00:07:22,240 --> 00:07:25,760 Speaker 1: excuse because all airlines have to pay these same costs, 130 00:07:25,800 --> 00:07:26,240 Speaker 1: don't they. 131 00:07:27,520 --> 00:07:32,960 Speaker 2: I think the not all airlines are exposed to these 132 00:07:33,040 --> 00:07:38,680 Speaker 2: costs as we are here locally. To put that in context, 133 00:07:38,840 --> 00:07:43,280 Speaker 2: airport landing charges since twenty nineteen has gone up eighty 134 00:07:43,560 --> 00:07:49,480 Speaker 2: four eighty five percent. You know, inflation since then has 135 00:07:49,520 --> 00:07:53,560 Speaker 2: been around twenty nine to thirty percent, and our airfares 136 00:07:53,560 --> 00:07:56,480 Speaker 2: have gone up thirty two percent during that same period. 137 00:07:57,360 --> 00:08:02,520 Speaker 2: So and this is all happening, you know, specifically in 138 00:08:02,560 --> 00:08:06,640 Speaker 2: the case of our operations at our hub airport. So 139 00:08:06,800 --> 00:08:12,800 Speaker 2: we are disproportionately exposed to that cost inflation. As far 140 00:08:12,880 --> 00:08:18,040 Speaker 2: as airport airline profitability is conserned, you know, airlines are 141 00:08:18,040 --> 00:08:22,520 Speaker 2: cyclical businesses, and some of the businesses that are currently 142 00:08:24,400 --> 00:08:28,560 Speaker 2: making money our businesses that have also relatively recently gone 143 00:08:28,560 --> 00:08:33,960 Speaker 2: through a downturn. It's partly nature of the business. But 144 00:08:34,080 --> 00:08:36,760 Speaker 2: in this instance there's a lot of things we are 145 00:08:36,800 --> 00:08:40,040 Speaker 2: exposed to hear locally that some of our competitors aren't. 146 00:08:40,360 --> 00:08:42,920 Speaker 1: So politics, of course, you can't escape at David Seymour 147 00:08:42,960 --> 00:08:46,880 Speaker 1: yesterday says go broke, you're too politically motivated. Basically the 148 00:08:46,880 --> 00:08:48,520 Speaker 1: government should sell you. You say what. 149 00:08:50,200 --> 00:08:51,960 Speaker 2: I say, I'm glad I'm not in politics. 150 00:08:52,440 --> 00:08:54,640 Speaker 1: When do I ring you Nicol and you go, look, 151 00:08:54,800 --> 00:08:56,959 Speaker 1: it's been a good year Mike, the planes are here, 152 00:08:57,040 --> 00:08:59,959 Speaker 1: the engines are on. Life is good. When does that happen? 153 00:09:00,960 --> 00:09:07,120 Speaker 2: Look, the the program to reset the business is not 154 00:09:08,960 --> 00:09:12,439 Speaker 2: is not a quick fix. As aircraft arrive, we need 155 00:09:12,480 --> 00:09:17,000 Speaker 2: to deploy them smartly, but we'll also need to reset 156 00:09:17,040 --> 00:09:20,040 Speaker 2: the business smartly, and that'll take a bit of time. 157 00:09:20,600 --> 00:09:22,640 Speaker 2: I'm hoping i'll sit with you in the next eighteen 158 00:09:22,720 --> 00:09:28,160 Speaker 2: twenty four months, Mike, and we'll be talking about the 159 00:09:28,160 --> 00:09:30,640 Speaker 2: successor that turnaround program here at Air New Zealand. 160 00:09:30,679 --> 00:09:33,079 Speaker 1: All right, well, I wish you well, Nicol Ravishenker, who's 161 00:09:33,120 --> 00:09:35,200 Speaker 1: the Air New Zealand chief executive. This is what I 162 00:09:35,200 --> 00:09:37,640 Speaker 1: will raise with the Prime Minister on Monday. If there's 163 00:09:37,720 --> 00:09:40,800 Speaker 1: numbers of correct landing charges up eighty five percent inflation 164 00:09:40,960 --> 00:09:44,480 Speaker 1: thirty I mean there's something wrong there isn't there those charges? 165 00:09:44,520 --> 00:09:47,240 Speaker 1: But every plane that lands plays the lands so you 166 00:09:47,320 --> 00:09:49,920 Speaker 1: know Kitar paid the landing charges. So I mean, yes, 167 00:09:50,000 --> 00:09:52,120 Speaker 1: that's a problem, but there's there's something there that the 168 00:09:52,160 --> 00:09:55,440 Speaker 1: majority shareholder surely can do something about it. 169 00:09:55,920 --> 00:09:58,800 Speaker 2: For more from the Mic Asking Breakfast, listen live to 170 00:09:58,960 --> 00:09:59,480 Speaker 2: news talks. 171 00:09:59,520 --> 00:10:02,719 Speaker 1: It'd be for six am weekdays, or follow the podcast 172 00:10:02,720 --> 00:10:03,640 Speaker 1: on iHeartRadio.