Much of Air NZ's fleet has been grounded during the pandemic. Photo / Brett Phibbs
Air New Zealand faces continued Covid-19 uncertainty but will dive deeper into a new digital strategy, leverage more from its loyalty scheme and has identified some international network changes when it emerges from the crisis.
Shareholders were today warned the impact of the coronavirus will be ''longer and deeper'' than it was initially thought.
Chief executive Greg Foran said
earlier this year it was thought the airline would shrink by a third.
''Reasonably early on we felt that we would be 30 per cent smaller. We hoped that by April of next year that we would be back at 70 per cent of where we were pre-Covid but I think it is going to take quite a bit longer to recover to those levels.''
In the meantime the airline - which has drawn down $110 million of a $900m Government loan - faces an uncertain financial future.
Its chairwoman, Dame Therese Walsh, said it was still unable to give guidance for the current financial year as hers and other airlines cope with the worst economic crisis in their history.
This will mean a further loss on top of Air NZ's $454m after-tax loss in the past year.
''Given the uncertainty surrounding travel restrictions and the level of demand as these restrictions lift, Air New Zealand is currently not able to provide specific 2021 earnings guidance,'' she said.
''However, each of the scenarios we are currently modelling suggest we will make a loss in 2021.''
The airline bosses told the virtual annual meeting of shareholders that the airline would emerge smaller from the crisis, operating fewer widebody planes, and Walsh opened up the possibility of selling engines and parts from Boeing 777s which are in deep storage for at least another year.
In a note to staff following the meeting Foran said that the new international border would focus on North America. It would make more of alliances and partnerships to ''extend and protect'' its reach.
On the Tasman there would be a more ''tailored'' approach to the more valuable business customers with the amount of flying year-round balanced to ensure fewer aircraft on the ground.
Foran said digital technology and tools would be at the heart of customer innovation and operational performance improvements.
''We have a team dedicated to putting as much control of the travel experience, not just with our airline but also with partners, into the hands of customers,'' he said.
The airline was also expanding its loyalty scheme ''as a second growth engine'' and is testing the new programme "with thousands of our customers across the country". High-value customers would be targeted.
''We can see an Air New Zealand in the future that is smaller for a time, but even more efficient, operating fewer wide-body aircraft. The difficult decisions we have made in the past several months, whilst painful, are with a view to making Air New Zealand even more profitable in the future.''
Foran came from heading Walmart in the United States before the Air NZ job and when asked if he would be applying his fast moving consumer goods (FMCG) background to the airline he said it already ran a hybrid model and would continue to.
Its short-haul operation was similar to low-cost carriers with variable pricing and ancillary revenue while long-haul flights were full service.
''Our intention would be to maintain that hybrid approach,'' he said.
''The actions we are taking are based on a range of scenarios that may or may not play out in the way we envision, but they are necessary in order to ensure we can pivot our business and our planes quickly to those routes that make sense in the new world order.''
The 90-minute meeting included a barrage of questions relayed from shareholders.
The airline will be charged between 7 per cent and 9 per cent for the $900m loan and when asked why it was so high Walsh said the interest rate environment had changed since when it was urgently negotiated as credit markets were strained in March.
"Yes the interest rate is high but it is also reflective of the environment at the time.''
The airline's level of borrowing would depend on how quickly it could get to resuming normal operations and she restated the intention to raise capital in the first half of next year.
The airline's staff across the entire business had made significant personal sacrifices, with more than 3500 people losing their roles, over 600 staff taking voluntary exit, and almost 400 taking significant reductions to their work hours.
Asked whether further layoffs were possible she said the airline had just finished phase two of reviewing costs and was ''stable'' today but further reductions depended on scenarios that played out.
''Everything is under review at all times.''
In response to questions Walsh said the airline wasn't interested in getting into other transport modes, ''flights to nowhere'' (as its domestic network was recovering strongly) and it was worried about the environmental fallout of flights to Antarctica.
Dividends would be restored when financial conditions allowed.
Earlier Foran outlined to shareholders the extent of the crisis and again apologised for poor customer service.
From over 30,000 seats sold on the domestic network each day in 2019 to just a handful during level 4, never before had Air New Zealand experienced this degree of change in such a short period of time.
"This tested every aspect of our customer service proposition and although this situation was entirely unforeseen, and even our most pessimistic black swan event planning could not have predicted this, at times we did not just stumble, we fell. For that I sincerely apologise."
Air NZ's Kia Mau, 'get ready' project is built on five pillars.
1. Prioritising People: taking care of our biggest asset
2. Experience Excellence: shaping our network and products around our most loyal customers and the experiences they desire most.
3. Lifting Loyalty: Strengthening loyalty to create a second growth engine.
4. Do it Digital: putting significantly more control of the travel experience in our customers' hands by developing innovative digital tools and products.
5. Ambitious Action: putting greater focus on leading and advocating for action on decarbonisation with the goal of achieving net zero emissions by 2050
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