Air NZ boss Greg Foran says friction points like home isolation are delaying recovery. Photo / Brett Phibbs
Air New Zealand is clear on where it wants to fly - and where it doesn't - as it rebuilds its international network.
It has put a wide range of destinations into a rejigged schedule but chief executive Greg Foran doesn't expect heavy demand for international flights until New Zealand changes its home isolation requirements for returning Kiwis and later this year for people from other countries.
While outlining the airline's refreshed Kia Mau Thrive Strategy to the Herald, he said two years into the pandemic the outlook remains uncertain.
Some airlines were bullish about demand being at pre-Covid levels by the end of the year.
"Maybe they will be, I don't know. It will depend on the settings and each country."
He said "friction points" such as home isolation requirements of seven to 10 days would hit demand although over time they would be dropped.
The airline is set to announce another heavy half-year loss this month and has plans locked in for what he described as a "massive" capital raise in the first quarter of this year.
While unable to talk about the details of the capital raise — estimated by some analysts to be debt and equity of at least $1.2 billion — he was hopeful it would go ahead after being delayed several times.
The timing could be more favourable this time because of the reopening of international borders to Kiwis initially from the end of this month and to arrivals from other countries from the middle of the year.
He said the arrival of Omicron had affected domestic bookings — which hit a record last July — but growth of the domestic operation was one of three key areas in the five-year strategy.
The airline carried 7.4 million domestic passengers last year, up from 6.7 million in 2020.
New routes were being explored along with different schedules and a subscription service to give members preferential access to flights and cheaper fares would be trialled.
"Domestic is a great business for us — it gives us our best return on invested capital."
The development of smaller battery or hydrogen-powered aircraft later this decade would give the airline even more scope to expand its network.
A second part of the strategy is to optimise its international network, part of which had been kept "warm" by cargo flights which hadn't stopped during the pandemic.
Last week the airline relaunched 24 international routes, including transtasman flights to Adelaide and Cairns and a return to Singapore late in March, San Francisco in April, Hawaii in July and Chicago on September 30.
Foran said he was determined to launch non-stop services to New York in September this year.
The airline was moving towards a uniform Boeing 787 Dreamliner fleet and would build up frequency to fewer destinations than before Covid hit.
"We're pretty clear where we want to fly and when we don't want to fly. You can never say never but we don't [intend] to jump back to South America or go to London."
Shanghai was on the list but he doubted China would open up this year.
The long-awaited relaunch of the airline's business premier seats would happen early next year and would initially be fitted on new Dreamliners on order. New plane orders had plateaued.
"You'll start to see that the amount of capital that's required starts to come down. The business has spent quite a bit of capital [over] the last few years so that gives us a chance to sensibly start to improve our returns on invested capital."
Cargo would remain a critical part of the operation and he was confident the Government's freight support scheme would be extended beyond the March cut-off date as self-isolation requirements made it difficult for airlines to operate traditional passenger services.
Air New Zealand would not get into the dedicated freighter business.
Part three of the strategy is to further boost the airline's loyalty scheme which has 3.6 million members and in Forsyth Barr analysis late in 2020 was valued at $725m.
The airline has formed new partnerships during the past two years and was about to relaunch its scheme for top-tier flyers to make it easier for them to get upgrades on flights. It was investigating launching a programme for customers who prioritised sustainability initiatives.
Foran said although loyalty was a significant part of the business, Air New Zealand had no intention of selling it off.
''We have done some work on that. We don't have any intention of doing what some airlines have done. My analysis of what I've seen happen - when they do that they end up buying it back.''
He said the airline would like to see Airpoints be like a "second currency" in New Zealand.
The airline's workforce is about 8000, compared to about 12,500 two years ago. About 200 staff had been rehired in the past few months but Foran said it was hard to tell whether numbers would fully recover and what shape the airline would be in as it recovered from Covid.
"It's easier to grow than shrink and if we suddenly found out we had an amazing opportunity then we'll go out there and get ourselves organised and go a bit quicker. But at this stage we think a measured approach is needed."
The route restart:
Asia and US
Auckland - Singapore, March 27
Auckland - San Francisco, April 14
Auckland - Seoul, July 7
Auckland - Chicago, September 30
Pacific
Auckland - Honolulu, July 4
Auckland - Tahiti, July 6
Auckland - New Caledonia, July 6
Christchurch - Nadi, July 5
Wellington - Nadi, July 5
Australia
Auckland - Adelaide, July 6
Auckland - Cairns, July 5
Auckland - Hobart, July 7
Auckland - Gold Coast, March 2
Auckland - Sunshine Coast, July 9
Christchurch - Brisbane, February 28
Christchurch - Sydney, March 1
Christchurch - Melbourne, July 2
Christchurch - Gold Coast, July 3
Wellington - Brisbane, March 31
Wellington - Melbourne, April 4
Wellington - Sydney, April 5
Queenstown - Brisbane, June 24
Queenstown - Melbourne, June 24
Queenstown - Sydney, June 25
All of Israel’s commercial aircraft were sent outside of the country.