Nikhil Ravishankar: Air New Zealand CEO on the airline expecting a $390 million loss amid ongoing fuel crisis

Air New Zealand's CEO says the airline will trim more flights, with a forecast it'll be $390 million in the red this financial year.

It's blaming the fuel cost hike lifting spending $240 million more than expected. 

The airline told NZX it's already reduced overall capacity three to five percent since the Iran war began.

Nikhil Ravishankar says cuts may continue even after jet fuel prices ease, with cuts for August to October announced soon.

"We either sort of roll over the changes that we've made into July - or we might have to go a bit further, depending on what fuel's doing."

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Episode Transcript

Speaker 1 (00:00):
Now, of course, we have more bad news for Air

(00:01):
New Zealand. The airline is now forecasting a full year
loss of close to four hundred million dollars. This is
obviously driven by the war in Iran and related fuel costs.
Nicol Revshank is Air New Zealand CEO and with us
high Knickel is for coming in. I'm well, thank you.
It can't be much fun at the moment, is it?

Speaker 2 (00:17):
It's good fun. The fundamentals of the airline is in
really good shape. Yeah, quite genuinely. You know, we've been
dealing with these engine issues for the last four years
and as of today we only have one aircraft grounded.
We are twenty percent of our fleet parked up, so
the engines are starting to come right. We have two
new aircraft on its way, We're well through the retrofit

(00:39):
program on the wide bodies, and we've got a strategy
that we all have stacked hands and we're keen to
execute it now. But you know, the slight complication is
the fact that there's a war going on and that
impacts us so very directly, and we have to deal
with what's in front of us.

Speaker 1 (00:57):
Yeah, but I mean to be fair This is not
the only thing you're dealing with, right, dealing with a
compounding lot of stuff, including a recession in New Zealand
that we've just come through. Are you going to need
a bailout of this carries on no enough cash reserves?

Speaker 2 (01:08):
Yeah, we've You know, COVID TOTA is a great lesson
in terms of the war chest. You know, we knew
what we were facing into as we came out of that,
that crisis was a more volatile and more uncertain world,
and so we've spent the last six years really building
a bigger war chest for the airline, a much bigger

(01:29):
shock absorber, if you will. And that's meant that we
have a long we have a duration of time where
we can cope with this crisis.

Speaker 1 (01:38):
Okay, are you going to have to trim flights further?

Speaker 2 (01:41):
We will have to. We're making sure that we're giving
everyone certainty around what that's going to look like. Ye,
So you won't see us doing any more trimming or
consolidating of flights out to the end of July school holidays.
We all want that certainty. And then by the end
of this month and early into next we will announce

(02:03):
what August to October is going to look like. So well,
we you know, we either sort of roll over the
changes that we've made into July, or we might have
to go a bit further, depending on what fuel is
doing at any point in time.

Speaker 1 (02:17):
Logically, some of what you're doing may become permanent.

Speaker 2 (02:20):
Right, not necessarily, no, I mean, one thing that's worth
keeping in mind is the way this crisis has impacted us.
You know. One of the phenomenon in airlines, which when
I say it will sound obvious, but is an important factor,
is we sell tickets up to a year ahead of

(02:41):
when you actually fly. Yeah, and so a lot of
the tickets we've sold are well before the crisis, but
we buy fuel on the day, if you will. And
so the crisis impacts us even more because we're now
flying flights that were priced and sold well before the
crisis started.

Speaker 1 (02:58):
You're losing money on and on those prices.

Speaker 2 (03:01):
Of course, so when fuel prices start to settle, it'll
take us a longer period of time to recover some
of those cost shocks that we've had to bear. But
we will, you know, work through that.

Speaker 1 (03:12):
And so am I reading it right that what you're
saying is that what you are doing at the moment
in terms of trimming, may last longer than the actual
the fuel impacts that we see. We may see fuel comeback,
but you're going to have to keep those trim flights
for a little bit long. Yeah.

Speaker 2 (03:25):
As the fuel starts to come down, we'll start to
ease off on the trimming, but it'll be slowly, slowly.

Speaker 1 (03:30):
How do you feel about Quantus seating your lunch because
they are really going hard on New Zealand day.

Speaker 2 (03:35):
Look in New Zealand domestically we do about three thousand
flights a week. Yeah, a competitor does around three hundred. Yeah,
and we have cut about five percent of our flights flying,
whereas in from Auckland to Wellington, for example, our competitor

(03:56):
has cut thirty four percent and about eighteen percent of
flying has been reduced from Auckland to christ Church. So
I'm not sure any lunch is being eaten, Sire enough.

Speaker 1 (04:09):
Nicol, thanks for coming in man. I really appreciate and
beast of luck because I know it's a tough time
at the moment. Nicol Rebshank in New Zealand CEO. For
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