Air NZ CEO Christopher Luxon has worked to improve relationships with travel agents and the tourism industry. Photo / Alan Gibson
Air New Zealand chief executive Christopher Luxon has carved out a big reputation for foot-on-the-throat attention to the bottom line.
That's already paying off with soaring earnings in the past year and even better promised in 2014.
But he's not about to let that commercial focus bury the airline's hard earned edgy image that helps a relatively small airline get noticed.
See Luxon interviewed as part of our "Meet the CEOs" series:
"It's been important to talk about commercial performance this year as we try and reset the business and give it a strong commercial engine but that's not code for losing our brand mojo," Luxon said.
Luxon started his career at Unilever as a marketer, it's in his nature, but it is the stellar financial performance of the airline and a fresh, outward-looking approach that earns him Herald Business Leader of the Year.
He is zealous about what he calls the best job in the world but, as one tourism leader observed, he "doesn't bleed teal" and for the business that's a good thing.
Its 2012-13 earnings before tax of $256 million was an increase of 172 per cent, and the first half of the current year is running 20 per cent ahead of the corresponding period 12 months ago.
That is at a time when airlines in the region are struggling. Qantas has issued a dire profit warning and is slashing 1000 jobs and Virgin Australia is having to tap its airline shareholders - including Air New Zealand - for a big cash injection. Across the Asia Pacific region revenue fell 18 per cent in the third quarter of this year at the same time as Air New Zealand was building confidence about the sharp surge in revenue in the same period.
When Luxon took over on January 1, Air New Zealand's share price was $1.29. Yesterday it closed at $1.635, a gain of 26.7 per cent so far this year, making it one of the top 10 performing stocks. While the already listed airline avoided the bad odour surrounding power company sell-downs, the sale of 20 per cent of Air New Zealand went smoothly and at a price of $1.65 was close to the five-year high of $1.69.
Luxon has been chief executive for nearly a year but for 18 months before that he headed Air New Zealand's international airline where he made his mark.
Long-haul airlines can make money quickly when they get it right but when they don't, they burn cash.
Air New Zealand was losing $2 million a week in its long-haul operation before Luxon joined the company but in the time he was there profitability had been turned around.
"That wasn't a sustainable place to be. It's very important that Air New Zealand is a viable airline in the Pacific Rim market otherwise we become a ... bit player," he said.
Luxon got the airline out of loss-making routes - most notably from the long-standing Hong Kong to London route. The airline was facing problems on the Los Angeles-London sector but recalibrating sales tactics brought in more business from high yielding US and British premium travellers rather than relying on through traffic from New Zealand.
He drew on his market development experience to link local sales forces to a global organisation.
During his time at the international airline, alliances were launched with Cathay Pacific and Japanese airline ANA and there was a big drive to get rid of cost duplication.
Since becoming chief executive the entire company has been shaken up to leverage the scale of the business and shift it from a business unit structure to a functional structure.
The top seven-member leadership team has been re-organised with human resources chief Lorraine Murphy, previously from Campbell Soup, a key new appointment and a 70-strong group under that with existing staff who have been "repurposed". New blood has also been brought in including Calum Laming, a former Etihad executive who has just finished a comprehensive review of customer experience.
The frequent flier scheme has been revamped to reward those who spend more, new check-in and mobile apps developed and lounges have been, or will be, redeveloped. There have been big moves on consistency of aircraft, lounges and service but the airline wants to retain the casual professionalism that makes Air New Zealand different.
"If we ran this airline like everyone runs any other airline then we wouldn't be in business," said Luxon.
Clearer lines of responsibility and accountability have been established and as Luxon says, "ruthlessly" enforced. Those who know him don't doubt that, but say he will equally reward good performance.
Luxon said: "Hitting the numbers and doing what we say we're going to do and holding each other accountable are core values for me."
Luxon is generous in his acknowledgement of those who built the airline to the shape it was when he took over and says without the support of his team he couldn't have brought about the changes he has.
The airline is working more closely with travel agents after what one said was a decade of closing the door on them. Likewise the tourism industry has welcomed a new approach from Air New Zealand which Luxon said was needed.
"It's coming from the realisation that we were not partnering with the industry as well as we should have, we were a bit protectionist and defensive at times and actually we're all united in our desire to grow tourism."
He has started regular meetings with the travel trade, tourism industry and unions with which he said relationships had traditionally been conflict based.
He wants to head off big issues - such as engineering redundancies - before they come to a head.
"In the past a lot of Air New Zealand's relationship with the unions has been adversorial and I'd like to be able to work towards a constructive and strategic way. We can disagree without being disagreeable."
Again there's a steely edge: "I don't think they doubt where I come from or what I try to achieve."
When asked asked about Qantas' plight, his competitive streak shows.
" It's incredibly satisfying seeing very big airlines doing infinitely worse than Air New Zealand."
Luxon took the job fully aware of the airline's place in the national consciousness. His aunt harangued him at a family gathering about a cancelled Hawaii flight before he'd even started and with millions of customer interactions every year complaints go with the territory.
"I go places and people will tell me the good, the bad and the ugly of their recent Air New Zealand experience. I would sooner have people engage than not."
Tourism New Zealand chief executive Kevin Bowler said Luxon brought a fresh approach as a relative outsider and unlike others who have served in the airline did not "bleed teal blood". While Air New Zealand is Tourism NZ's biggest commercial partner, Luxon was pragmatic enough to realise the organisation did have to deal with other airlines and accepted that. "He's very smart and you can see that in the commercial performance."
Engineering Printing and Manufacturing Union assistant director of organising Strachan Crang said Luxon was more hands-on than Rob Fyfe and had done more restructuring in the past 11 months than has been done in any of the past five to six years. Nearly 70 jobs have been lost at the airline's subsidiary Safe Air but the decision to refurbish planes in Auckland has saved 130 engineering jobs for now. "While we don't agree with everything he's done he's been communicative and when dealing with him he's more about engagement and being upfront."
Head of Private Wealth Research at Forsyth Barr Rob Mercer said Luxon brought a new set of skills to the airline. "His first challenge was reorganising the long-haul routes and you've seen the steady influence of some of those changes coming through. You can see there is very strong accountability across all areas but there's more sensible outcomes from all that. I can see that they're definitely in a nice place at the moment."
Tourism Industry Association chief executive Martin Snedden said Luxon had a strong and visible strategy for growth right from the start. "He has pushed them forward in that respect. He has made some hard calls on routes that are unprofitable and he's cut those and taken the opportunity with new markets that are emerging around the Pacific Rim. There's an absolute clarity about what he wants to achieve and that's really good to be around and it rubs off on other people."
Air New Zealand deputy chief executive Norm Thompson has been with the airline since 1968. "He's a very quick learner. I can say that with absolute confidence. He's bottom-line focused and focused on delivering on what you say you're going to deliver. There are no excuses. But at the same time he gives great recognition to those who do."
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