Air New Zealand bosses have to make the multi-million dollar calls on planes. Photo / Brett Phibbs
Air New Zealand bosses have to make the multi-million dollar calls on planes. Photo / Brett Phibbs
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Air New Zealand is on the hunt for a new chief executive to replace Christopher Luxon, who leaves the company on September 25. If history is a guide that appointment will be made very soon and the board will have already fixed on firm candidates, almost certainly from outsidethe airline. Luxon's appointment was announced six months ahead of him moving into the chief executive's office at the start of 2013 so the handover period will be even shorter this time. Here are some of the challenges they will face.
The extraordinarily high profile of the job
This can be a surprise but is what good Air NZ bosses grow to love. Being head of the airline is up there with Prime Minister and captain of the All Blacks in terms of jobs with the brightness of the spotlight shone on them. Luxon saw the job as a way of making a difference in New Zealand, his regular references to supercharging the economy were heartfelt. But those in the role are a political target. Self-proclaimed champion of the regions Shane Jones is not the first politician to play the Air NZ card, when it suits. In those times a good sense of humour is handy.
In February the airline announced its first-half net profit dropped by 34 per cent to $152 million in the first half to December. The net profit is down $80m from $232m a year earlier. For the full year a forecast of up to $525m made in October last year has been revised to as low as $340m. This after its second highest profit of $540m last year and a whopping $663m in 2016 - the highest in the airline's 79-year history. A fall off in domestic demand apparent from around Christmas, higher fuel costs and ongoing expenses associated with Dreamliner Rolls-Royce engine problems are biting this year. The outlook delivered at its profit briefing in August will be telling. There is nothing to suggest the domestic economy has improved and the rate of growth of international arrival numbers continues to level off. Air NZ is the single biggest carrier of tourists to the country and overseas visitors make up a quarter of those on domestic flights.
Keeping Air New Zealanders as happy as they have been
Most of the 12,500 staff, long known as ''Air New Zealanders'' are a happy and committed bunch if engagement and desirable workplace surveys are a guide. The strong financial performance of the past few years has resulted in bonuses of up to $2500 a year being paid to those staff not on incentive schemes. Apart from a pre-Christmas flare up with engineers, there's been industrial peace for years and unions do say the airline's High-Performance Engagement programme - where grudges and traditional animosities are left outside the room - does work. Pilots are locked into a long-term deal, negotiations to merge subsidiaries Mt Cook Airlines and Air Nelson are making slow but steady progress.
The new boss will face the challenge of maintaining what has been relative industrial harmony.
The airline has topped recruitment firm Randstad's latest brand research as the most attractive employer in the country for the third year in a row. It also has been chosen as Australia's most respected company for the last three years. So the pressure is on the new recruit for the top job to keep those accolades coming - the only way is down. The big bonuses for the troops are at risk, the airline has consultants in to shave 5 per cent of overhead costs and the new boss will join an executive team that has imposed a pay freeze on itself.
Competition that won't go away
In the lucrative domestic market - where Air NZ dominates with 80 per cent of traffic - Jetstar shows no signs of backing off the main trunk routes. While the Qantas-owned rival is shakier on regional routes its exercises competitive pricing power that means Air New Zealand must frequently roll out deals to maintain its strong position. On long-haul routes, high fuel prices and ebbing demand hurt Air New Zealand but they do more harm to overseas carriers with less skin in the New Zealand market. There have been a couple of recent departures - AirAsia, Hong Kong Airlines and Emirates from the trans-tasman market from Auckland - but for the most part the big airlines are hanging in here. On routes Air New Zealand used to have to itself, such as Auckland-Honolulu, rival Hawaiian Airlines is not going away and there's competition coming over summer from Air Canada to Vancouver. Qantas is hoping to turn the tables on Air NZ by attracting Kiwis to its new jumping off points on new non-stop flights to the US mainland.
The usual airline risks - and they can be scary
With more than 100 planes in operation the safety responsibility is massive and the area of the business that is non-negotiable. But the financial stakes are massive, with decisions needed on multi-billion-dollar aircraft deals that determine the future of the airline for years. They can earn big money when the equation is right but can burn even more, and faster, if the stars are not aligned.
Operational issues such as engine problems are a challenge for airline bosses. Photo / Supplied
Althugh he has since changed his tune, the ''Oracle of Omaha'' Warren Buffett once famously said that if he made a move to invest in airlines someone close should call 911. The new chief executive will be heading a company with a better recent track record than most of its peers but still vulnerable to cyclical swings. Soaring fuel prices, trade wars, economic crises, pandemics, storms and volcanoes can very quickly change the equation. Air New Zealand still has niggly ongoing problems with its Dreamliners, it has extended the lease of an Eva Air 777 to cover Rolls-Royce engine issues and is having to do extra checks on braking and fire-fighting equipment on some of its planes.
