Greg Foran started as Air New Zealand's chief executive on February 3, just as the airline was pulling back on flights to Shanghai, was about to rescue stranded Kiwis in Wuhan and as the airline industry was plunging into its deepest crisis. He tells Grant Bradley what it's like to lead a business whose revenue has collapsed from $6 billion a year to $500 million and what the airline could look like when the crisis eases.
When did you first become aware of the coronavirus?
''I first started to get along side it with the rest of the public in January, and having lived in China for three years and having been to Wuhan many times because we've got Walmart stores there I took an interest in it.
I've been plenty of wet markets over the years so I know what that environment's like, so when I started to understand that they were locking down Wuhan, because I've been there lots of times and I've seen some of this occur.
I've seen what happens when riots can unfold. when the police get involved and they lock down areas. So when they were locking down Wuhan I knew that this is a pretty big deal.
Social media is such that you're not going to be able to contain this within China and people are going to hear about this. So when you can make a decision to lock down a city of 12 or 13 million people it's getting quite big, so my initial reaction was, this is probably more serious.
How did the crisis unfold at the airline?
I watched that being discussed the week before I started, and then on Sunday (February 2), the day before I started, which the decision was right at that pull flights from Shanghai.
And on my very first day on Monday we were discussing the exit out of Shanghai, what were the likely halo effects and back then I have to say that our thoughts at that stage were it was just going to be contained to China.
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Since then each Monday when we've had the executive meeting we've watched the concentric circles expand from China to the cruise ship in Japan and then all of a sudden, Korea. So we made a decision to pull out of Korea.
And we watched the concentric circle expand down to Hong Kong and then to Singapore and then it became a discussion, not just around countries but around the Asia region. At that point, things were still pretty solid across the Tasman and the Pacific Islands, strong in domestic and growing stronger in America people started to pivot from flying to Asia to fly to the United States.
But we watched the whole thing deteriorate, to a point that effectively we are now almost an airline in hibernation. And all of that has happened within a matter of three weeks.''
What in your past prepared you for this kind of crisis?
''All kinds of experiences over the years the 41 years, I've been in business from beginning to dealing with stores that have had fires, which was the sort of thing I was dealing with and I was 20, significant product recalls in later years, but probably the most significant ones that I've had to deal with have been working in China (where he headed Walmart), and the complexities of actually living and running a business there are significant. And I think that hardened and toughened me to deal with all manner of issues from landlords turning up overnight to take stores back to dealing with, you know, massive fraud issues both in terms of employees and products and having to deal with governments in both Beijing and also provinces.
And then of course, back in the US (where he also led Walmart) the scale of that business and the complexity of around 1.2 million associates. We served half of the United States in our stores every week - 160 million people.
So what we dealt with in Walmart on a day to day basis was the very best of mankind and the very worst of mankind. Most recently we had a week where we had two terrible shootings.
In one a manager and another associate were shot and killed by another associate one in the parking lot, and in the other one inside the store associate tried to set a fire in the store and got into a gun battle with the police.
Days later a young man in El Paso, Texas, walked in and 22 people were shot and killed in a matter of minutes in a Walmart store on a busy Saturday morning.
Those are a few things that you deal with in between the various trading ups and downs.
But nothing quite like this - to go to come into the business on day one and have almost a $6 billion business a week and now on week eight, have a business that's got an annualised turnover of less than $500 million. Nobody can be completely prepared for that, but it is what it is and you have to play the cards that you've been dealt.''
At what point did you know that the $900m Government backstop was going to be essential?
''We were starting to say to ourselves before that (the Saturday, March 14 announcement aimed at effectively closing the borders) occurred that there was every chance that we're going to see some border restrictions come in.
We have a look at our cash flow forecast during the previous week and said to ourselves it would be appropriate if this thing extends for four to six months that we get ourselves some line of funding. If border restrictions come in, you're going to get a lot of people wanting to get refunds on tickets.
Obviously there's going to be way less flying so all of a sudden you don't have any cash coming in and you've actually got cash going out and this is a high fixed cost business, and the money drains out pretty quickly.
We said to ourselves at the beginning of that week if this happens we're in a good position, we've got over a billion dollars sitting in the bank, but maybe we need to just get ourselves shored up with some other lines if we need it. So we started some discussions with several commercial institutions but what changed, was that on that Saturday when the Government announced (border restrictions) you got the sense this was going to go on longer and that in order to secure the amount that we thought was going to see us through was probably going to be the Government.
As that unfolded they went to being the first port of call. We'd already started with the banks but we then pivoted to the government and got on with those discussions on the Sunday to Thursday up to when we announced. Jeff MacDowall (Air NZ's chief operating officer) and advisors were flying back and forward to Wellington and we got the right terms and pulled it together.
I'm grateful that it gives us a backstop - I hope we don't need it but you'd have to say increasingly this is going to be deeper and longer so it's appropriate that we've got a backstop.''
Does the loan that change the relationship with the Government?
''It fundamentally hasn't changed for me. I don't get a sense that the Government wants to run Air New Zealand.
As our major shareholder, I think it's appropriate that it helps us out in this time - this is not something that is our doing. It hasn't occurred because the airline is poorly run. It's an international event that's affecting everyone. Arm's length still applies.
You can imagine that over the last week or this week we've had a number of discussions daily, including what we can do to help bring New Zealanders home and some of that is international, but increasingly, over the last few days, it's been domestic - working with everyone down in Wellington, particularly the Ministry of Transport around getting students home. All of that is still arm's length, they're not in the business of dictating how Air New Zealand operates.
But at the same time, I feel that Air New Zealand has an obligation to do what's right for New Zealand both from a financial aspect - we are 52 per cent owned by the Government - but also a moral obligation as being the flag carrier.''
Do you have to be alert to claims of overpricing?
''We've turned the algorithms (complex, dynamic pricing matching supply and demand) off in the last couple of weeks because of the highs and the lows of them. They can't cope with the situation we're in.
Airline pricing is such a complex topic - I thought pricing in supermarkets and general merchandise was quite complex - this is different again.
You've got such high fixed costs and if you've got spare capacity, you don't want to fly with empty seats.
It's something that I want to get into and understand but over the last eight weeks my focus has been elsewhere. How do I feel about getting a product to price right and makes sense? I feel really strongly about that.
So, like everyone in New Zealand, I do take an interest. I haven't had much time to get into this over the last few weeks as you can imagine, but I do take an interest in what's actually cost to fly from Auckland to Tauranga? What does it cost to fly from Auckland to Sydney?
What's the variability that happens in that pricing? All of those are part of the puzzle which once we get through this I'm looking forward to getting into.''
What could airlines look like in the future?
''What I want to make sure that we do as an organisation is ensure that we come out of this fit and ready to deal with the changed aviation market. There's a risk that you could go through Covid 19, survive and come out, (but) really encumbered with high debt, labour in excess of what you need because you'll never quite got back to the size you were.
And then on the horizon airlines that have failed but now their assets have been bought for pennies in the dollar and the competitor that you're up against is much fitter and able than what you are so you need to get yourself in shape during this period.
There won't be a shortage of airplanes at the end of this and some are going to get some incredible deals and going to set themselves up with new contracts and new ways of working and Air NZ will have to compete with that.
I know that today everyone is incredibly focused on what's happening in the next four weeks then when we get to that maybe we can go outside of our houses. And by the end of the year maybe we've got a good domestic network.
But part of what I'm tasked to do is to think about what is this thing look like in 18 months' time or two years time and I suspect, the airline industry will have gone through quite a lot of change.
Foran has a reputation for mixing with all staff, he got around the country before the crisis hits. But now he will oversee a third of the workforce being laid off. How difficult will this be?
''It's certainly up there as some of the toughest things that you have to do. I wish that we weren't faced with a situation. It's just like being caught in a rip. The worst thing you can do is try to swim against it. The best way of surviving is to go with it, get taken out the back and actually it will at some point in time drop you in the shore but it won't be at the same point where you entered.
So it's pretty clear in my mind trying to fight this is not going to be the right approach - it is what it is I have to deal with it. I do not assume that the travel industry is going to bounce back quickly with all countries, dealing with Covid- 19 in countries in a different approach.
So the business is not going to come bouncing back like it did with Sars. It will come back but it's probably going to take longer and likely to be with different competitors. So with that in my mind now is the time to make some of these decisions and ensure that we will be in a position to do well. I don't like having to do it.
I want to work with everyone to get the right solution, but the reality is that business is immeasurably smaller today. Maybe by Christmas we'll be back to a third of the size, maybe in 18 months we're back to three-quarters of our size.
I've still got a responsibility to all of New Zealand to make sure that Air NZ pays its way and is not propped up by the taxpayers of this country. So you have to make choices. And these tough choices.''
His net worth has been estimated at between US$50m and $70m - does it make it harder to deal with staff who face being laid off?
''I didn't grow up a different than most people in New Zealand. My mum and dad who are both alive and locked down in a retirement village because they were both over 80. They were both school teachers I had a very standard, normal upbringing. I've worked pretty hard and all my life I've sacrificed a lot of things around work, and being prepared to do some things that some people wouldn't do - I've lived and worked within five different countries and earned some pretty significant money, particularly the last sort of five or six years. It hasn't changed who I am, doesn't change my outlook on life doesn't alter my beliefs and views.
I feel that I had earned every dollar that I received and obviously taken a significant change to come back to New Zealand because we wanted to come and live here.
It was a chance to come back and do something different; to give something back to New Zealand. I don't have any difficulty wrestling with that in my own mind.
It is what it is. And I just get on with it. Not everyone earns and lives the same way.
How's your workday?
Air New Zealand is an essential business. We're still flying lots of planes so I'm at work every day, particularly in these last few weeks as has just about the entire team.
It's been an awesome effort. We have a lot of people working from home - but for me, it's pretty much life as usual but at an enhanced level.
I don't get home until very late at night - we're maintaining current protocols around social distancing and we've got red teams and blue teams operating, so we don't get key people in the same room any more. We're working even longer and harder. We have a lot more to do.
Foran lives near Air NZ's Auckland headquarters with his wife Ondria and their 5-year-old son. How is it affecting them?
He's doing his homeschooling and getting on with it - he's loving it. They're getting on with it, we're grateful to in New Zealand getting on with it as every other family does.
I'm really pleased to be back home both from a family perspective - our parents are in that age group and I personally like the decisiveness of how New Zealand is dealing with this issue. I would rather be dealing with this here at this point in time.
Home renovations had paused.
''They're on hold - as are most things in New Zealand.''
His children through a previous marriage Kieran, Liam and Natalie are in Australia.
''They're dealing with various state laws that are in place in Australia - they just doing fine.''
He started at the airline as the world was starting to change for the worse. Was the timing exceptionally bad luck?
''I don't consider it bad luck or anything else - it is what it is and over the years I've dealt with situations - nothing to this extent - and after a while you realise these things occur and its an opportunity to stand up, lead and get on and deal with it. You're in a rip - you just have to come out of it. It is what it is.''
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