A fuel squeeze is driving higher airfares and stronger demand for Air New Zealand, particularly on international routes.
Long-haul fares have jumped 25% over the past year, trans-Tasman 20%, and domestic flights 10%.
Jet fuel stocks have climbed to 51.4 days, according to the latest figures.
Chief Executive Nikhil Ravishankar told Mike Hosking long-haul is 'a double-edged sword' – costly in fuel but buoyed by rising demand, with New Zealand being one of the safer passages available.
He says that's why they're being careful about how much long haul flying they consolidate.
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Speaker 1 (00:00):
News already this week that the jet fuel crunch is
real in Europe. Six weeks left, they say, and some
it looks to be full of cancelations. Back here in
New Zealand's long haul fairs are up twenty five percent.
Trans has been twenty Domestic up ten. Forsyth Bar, of
course has the airline heading for a turner and twenty
nine million dollar loss this year. Nicol Rabishank is the
CEO and he's back. Well, it's good to see you.
Speaker 2 (00:19):
Good morning mate.
Speaker 1 (00:19):
You enjoying this or not really?
Speaker 2 (00:22):
Well? Getting paid to solve complex problems is a privilege.
Speaker 1 (00:25):
Are you solving them or are you just riding them out?
Speaker 2 (00:28):
Well, we're doing what we can. We're controlling the controllables.
I was at Marsden yesterday and we had a ship
in just with jet fuel, dockton and delivering fuel. And look,
the current situation is being treated, at least by US
as it should be as a commercial crisis. The markets
(00:49):
continue to clear, and so we're controlling what we can make.
Speaker 1 (00:54):
So Marsden, the numbers that came out yesterday nationally for
all the fuels were from last week. So what you
saw yesterday presumably will be reflected in the next update,
and that's encouraging.
Speaker 2 (01:03):
That's correct.
Speaker 1 (01:04):
Okay, do you deal in jet fuel separately from the
diesel and the petrol the way the government seems to
lump them all and together rather supply chains different or
they all together.
Speaker 2 (01:14):
We get some shipments that only carry jet, but a
lot of them are bringing in all three fields at
the same time.
Speaker 1 (01:21):
What's your assessment of access to it at the moment
and is it getting worse.
Speaker 2 (01:28):
We've got twenty four days a jet in New Zealand
as we speak, which is the minimum service obligation, so
you know that's there. We have another thirty odd days
of shipments that are expected, a few of them already
in the economic zone and a few on their way
to New Zealand. As I said, at this stage, the
(01:48):
markets continue to clear. The way that the supply constraints
being handled is through price, and price will then naturally
lead to demand impacts. But we're not seeing necessarily the
supply lines fraying. These are extremely robust supply lines.
Speaker 1 (02:08):
That's good. I'm glad to hear you say that, because
that's me in my assessment, not only with jet fuel,
but the others. We in terms of will we run
out of or have trouble getting gas. It's not going
to happen.
Speaker 2 (02:19):
There are no signs yet. That's the situation we have
to deal with. That doesn't mean we shouldn't prepare for it,
which we are. But the markets continue to clear.
Speaker 1 (02:29):
I keep asking everybody the same question. I'm bullish. I
don't think the wall's going to restart. I think they'll
cut some sort of deal. The straight will open in
some way, shape or form in the not too distant future.
If that's to come to pass, when does your problem finish?
Speaker 2 (02:46):
Fuel today's at one hundred and seventy dollars and ninety
four cents. That's almost exactly double what is what we
would consider normal. The trajectory back to normal, if in
need your predictions right, will be a complicated return to normal.
So I think we're expecting, and as are the markets
(03:10):
that you know, best case scenario this is a six
month revision. It could be much longer than that, depending
on how much infrastructure is actually damaged.
Speaker 1 (03:19):
So whien the Europeans say they've got six weeks left?
Is that a numeracal statement as opposed to it? I mean,
if you're getting fuel they must get fuel, mustn't they.
I mean there's enough fuel, Its just price that's the issue.
Speaker 2 (03:31):
Yeah. I mean, look, I can't comment on the European situation.
I'm not exactly sure what's what the impact is. But
these supply lines, along the supply lines, because the fuel
supply chain is built for continuous flow, there's not a
lot of storage at any one point. You know, it's
(03:52):
expected that the market will continue to operate, and so
this could be a you know, a storage is as
much as anything else.
Speaker 1 (04:01):
Well, the government working on that as far as diesels concerned.
Would you if you could wave a magic wand do
we need to materially change what we do in this
country in terms of storage and access in that sense
going forward? Or is the just in time model about right?
Speaker 2 (04:15):
I think there is a good reason now to consider
what our minimum service obligations in the country are and
should be, but more specifically, how much terrestrial storage we
should look to have.
Speaker 1 (04:28):
Is that on you or is that on the government?
Is that on channel? Who's it on?
Speaker 2 (04:32):
I think all of us, you know, the fuel suppliers
us as a major user of the fuel channel government.
One thing I can assure you and your listeners, is
everyone who needs to be working this crisis actually is
doing a very good job, and we've got great collaboration underway.
Speaker 1 (04:50):
You're seeing pushback on price.
Speaker 2 (04:52):
Yet, Yeah, i'd remind you know a lot of our
stakeholders that air travel, you know, demand is elastic and
there's only so much our customers can absorb as far
as these price increases are concerned. And every market is different,
(05:13):
but we are starting to see certain markets where we're
getting pushed back on domestic Yeah, a long haul, I'm
guessing long haul.
Speaker 1 (05:24):
See, there must be an upside. Trying to work out
the upside. So you've got your engine, you've got your
capacity problems, but the upside, I mean the American airlines
are like laughing. You can't go through the Middle East,
you go up through as you go through America. I mean,
we've got to be benefiting from that, don't we.
Speaker 2 (05:37):
Well, it's a double ed sore long haul in that
bigger aircraft burn a lot more fuel. But the demand
is strong and the demand is not as elastic, and
we are one of the safer passages that's available around
the world. So you're seeing that we're seeing a little
bit of uplift and demand and hence why we're being
careful about how much long haul flying we do consolidate,
(06:03):
but it's not dramatic.
Speaker 1 (06:05):
What about the trans tasment is that hard work?
Speaker 2 (06:07):
Trans Tasman's going good. You know, we are alongside the
Australians being extremely rational around how we deal with this
channel challenge. Sorry, and so look, we are still flying
four hundred odd flights a day and one of the
main things you know, we need to do is to
(06:29):
ensure that we continue to do that. And if our
customers need to get anywhere, they can confidently book a
flight with their New Zealand and get.
Speaker 1 (06:38):
All sithe bar about right to twenty nine.
Speaker 2 (06:43):
The math is relatively simple to do, given you know
what we guided the market to. I think you know
four bar and others are working the numbers and they're they're.
Speaker 1 (06:57):
Thereabout okay, So two twenty nine with the downside risk
it would be worse or that's about as bad as
it gets.
Speaker 2 (07:03):
I'm not going to guide the market today, make but I.
Speaker 1 (07:07):
Just want to know how much trouble you think you're in.
Speaker 2 (07:09):
Well, I think the fuel crisis means guidance that was
in the market, which said second half performance will be
at all slightly worse than first half, and then you
overlay the cost of fuel.
Speaker 1 (07:24):
That's gone in the couple of things just before we rap.
I've been thinking about it, but it came up on
my feet. There's New York con trouble. You're gonna pull
the pin on that.
Speaker 2 (07:35):
I was in New York last week, as it happens,
to promote our brand new sky Nest product. You know,
the northeast of the United States is a huge market.
We have to be very careful about how we navigate that.
I think connecting New Zealand to the northeast of the
United States both from a perspective of driving business between
(07:59):
the two countries and tourism, it's an important link.
Speaker 1 (08:02):
So we don't make money though, does it.
Speaker 2 (08:05):
Well, we're flying the wrong aircraft at the moment.
Speaker 1 (08:07):
Correct.
Speaker 2 (08:07):
So after being in New York and promoting frankly New Zealand,
which was a very successful promotion, might I add we
had about seven billion impressions in two days. To put
that in context, that's the equivalent of a whole year's
worth of marketing that we would do to promote not
only a New Zealand services but New Zealand to the world,
so it was hugely successful.
Speaker 1 (08:29):
That's good, but it still doesn't answer my question on
whether you a pull.
Speaker 2 (08:32):
I'll come to that straight after that. I was in
Charleston and the reason I was there is that's where
Boeing manufacture the seven eight sevens, and two of us
new seven eight sevens are on the assembly line and
those are mission fit. They're being built for New York
and so we just need to get our hands on
those aircraft. There were due in May. Unfortunately there's a
(08:59):
few more issues on the Boeing side certification and otherwise,
which means they're going to be delayed to July August timeframe,
maybe this year. This year because Quantas are reading your lunch, though,
aren't they on that route. They have a better aircraft
that they're flying. The economics is slightly better, but not
that much.
Speaker 1 (09:19):
So you get that plane on, you can compete and
it's locked in and we're good to go.
Speaker 2 (09:23):
Yeah, we will have world class product on that aircraft.
It's the right aircraft, right engine, it's two of the
it's the first two long range Boeing seven eight sevens
anywhere in the world, and a new Zealand will be
taking delivery of those fantastic yeah, so we'll be ready
to go.
Speaker 1 (09:38):
Well, good luck with it all. Thank you are interesting times,
Nicol rabishenkam in New Zealand CEO. For more from the
mic Asking Breakfast, listen live to news talks. It'd be
from six am weekdays, or follow the podcast on iHeartRadio
News already this week that the jet fuel crunch is
real in Europe. Six weeks left, they say, and some
it looks to be full of cancelations. Back here in
New Zealand's long haul fairs are up twenty five percent.
Trans has been twenty Domestic up ten. Forsyth Bar, of
course has the airline heading for a turner and twenty
nine million dollar loss this year. Nicol Rabishank is the
CEO and he's back. Well, it's good to see you.
Speaker 2 (00:19):
Good morning mate.
Speaker 1 (00:19):
You enjoying this or not really?
Speaker 2 (00:22):
Well? Getting paid to solve complex problems is a privilege.
Speaker 1 (00:25):
Are you solving them or are you just riding them out?
Speaker 2 (00:28):
Well, we're doing what we can. We're controlling the controllables.
I was at Marsden yesterday and we had a ship
in just with jet fuel, dockton and delivering fuel. And look,
the current situation is being treated, at least by US
as it should be as a commercial crisis. The markets
(00:49):
continue to clear, and so we're controlling what we can make.
Speaker 1 (00:54):
So Marsden, the numbers that came out yesterday nationally for
all the fuels were from last week. So what you
saw yesterday presumably will be reflected in the next update,
and that's encouraging.
Speaker 2 (01:03):
That's correct.
Speaker 1 (01:04):
Okay, do you deal in jet fuel separately from the
diesel and the petrol the way the government seems to
lump them all and together rather supply chains different or
they all together.
Speaker 2 (01:14):
We get some shipments that only carry jet, but a
lot of them are bringing in all three fields at
the same time.
Speaker 1 (01:21):
What's your assessment of access to it at the moment
and is it getting worse.
Speaker 2 (01:28):
We've got twenty four days a jet in New Zealand
as we speak, which is the minimum service obligation, so
you know that's there. We have another thirty odd days
of shipments that are expected, a few of them already
in the economic zone and a few on their way
to New Zealand. As I said, at this stage, the
(01:48):
markets continue to clear. The way that the supply constraints
being handled is through price, and price will then naturally
lead to demand impacts. But we're not seeing necessarily the
supply lines fraying. These are extremely robust supply lines.
Speaker 1 (02:08):
That's good. I'm glad to hear you say that, because
that's me in my assessment, not only with jet fuel,
but the others. We in terms of will we run
out of or have trouble getting gas. It's not going
to happen.
Speaker 2 (02:19):
There are no signs yet. That's the situation we have
to deal with. That doesn't mean we shouldn't prepare for it,
which we are. But the markets continue to clear.
Speaker 1 (02:29):
I keep asking everybody the same question. I'm bullish. I
don't think the wall's going to restart. I think they'll
cut some sort of deal. The straight will open in
some way, shape or form in the not too distant future.
If that's to come to pass, when does your problem finish?
Speaker 2 (02:46):
Fuel today's at one hundred and seventy dollars and ninety
four cents. That's almost exactly double what is what we
would consider normal. The trajectory back to normal, if in
need your predictions right, will be a complicated return to normal.
So I think we're expecting, and as are the markets
(03:10):
that you know, best case scenario this is a six
month revision. It could be much longer than that, depending
on how much infrastructure is actually damaged.
Speaker 1 (03:19):
So whien the Europeans say they've got six weeks left?
Is that a numeracal statement as opposed to it? I mean,
if you're getting fuel they must get fuel, mustn't they.
I mean there's enough fuel, Its just price that's the issue.
Speaker 2 (03:31):
Yeah. I mean, look, I can't comment on the European situation.
I'm not exactly sure what's what the impact is. But
these supply lines, along the supply lines, because the fuel
supply chain is built for continuous flow, there's not a
lot of storage at any one point. You know, it's
(03:52):
expected that the market will continue to operate, and so
this could be a you know, a storage is as
much as anything else.
Speaker 1 (04:01):
Well, the government working on that as far as diesels concerned.
Would you if you could wave a magic wand do
we need to materially change what we do in this
country in terms of storage and access in that sense
going forward? Or is the just in time model about right?
Speaker 2 (04:15):
I think there is a good reason now to consider
what our minimum service obligations in the country are and
should be, but more specifically, how much terrestrial storage we
should look to have.
Speaker 1 (04:28):
Is that on you or is that on the government?
Is that on channel? Who's it on?
Speaker 2 (04:32):
I think all of us, you know, the fuel suppliers
us as a major user of the fuel channel government.
One thing I can assure you and your listeners, is
everyone who needs to be working this crisis actually is
doing a very good job, and we've got great collaboration underway.
Speaker 1 (04:50):
You're seeing pushback on price.
Speaker 2 (04:52):
Yet, Yeah, i'd remind you know a lot of our
stakeholders that air travel, you know, demand is elastic and
there's only so much our customers can absorb as far
as these price increases are concerned. And every market is different,
(05:13):
but we are starting to see certain markets where we're
getting pushed back on domestic Yeah, a long haul, I'm
guessing long haul.
Speaker 1 (05:24):
See, there must be an upside. Trying to work out
the upside. So you've got your engine, you've got your
capacity problems, but the upside, I mean the American airlines
are like laughing. You can't go through the Middle East,
you go up through as you go through America. I mean,
we've got to be benefiting from that, don't we.
Speaker 2 (05:37):
Well, it's a double ed sore long haul in that
bigger aircraft burn a lot more fuel. But the demand
is strong and the demand is not as elastic, and
we are one of the safer passages that's available around
the world. So you're seeing that we're seeing a little
bit of uplift and demand and hence why we're being
careful about how much long haul flying we do consolidate,
(06:03):
but it's not dramatic.
Speaker 1 (06:05):
What about the trans tasment is that hard work?
Speaker 2 (06:07):
Trans Tasman's going good. You know, we are alongside the
Australians being extremely rational around how we deal with this
channel challenge. Sorry, and so look, we are still flying
four hundred odd flights a day and one of the
main things you know, we need to do is to
(06:29):
ensure that we continue to do that. And if our
customers need to get anywhere, they can confidently book a
flight with their New Zealand and get.
Speaker 1 (06:38):
All sithe bar about right to twenty nine.
Speaker 2 (06:43):
The math is relatively simple to do, given you know
what we guided the market to. I think you know
four bar and others are working the numbers and they're they're.
Speaker 1 (06:57):
Thereabout okay, So two twenty nine with the downside risk
it would be worse or that's about as bad as
it gets.
Speaker 2 (07:03):
I'm not going to guide the market today, make but I.
Speaker 1 (07:07):
Just want to know how much trouble you think you're in.
Speaker 2 (07:09):
Well, I think the fuel crisis means guidance that was
in the market, which said second half performance will be
at all slightly worse than first half, and then you
overlay the cost of fuel.
Speaker 1 (07:24):
That's gone in the couple of things just before we rap.
I've been thinking about it, but it came up on
my feet. There's New York con trouble. You're gonna pull
the pin on that.
Speaker 2 (07:35):
I was in New York last week, as it happens,
to promote our brand new sky Nest product. You know,
the northeast of the United States is a huge market.
We have to be very careful about how we navigate that.
I think connecting New Zealand to the northeast of the
United States both from a perspective of driving business between
(07:59):
the two countries and tourism, it's an important link.
Speaker 1 (08:02):
So we don't make money though, does it.
Speaker 2 (08:05):
Well, we're flying the wrong aircraft at the moment.
Speaker 1 (08:07):
Correct.
Speaker 2 (08:07):
So after being in New York and promoting frankly New Zealand,
which was a very successful promotion, might I add we
had about seven billion impressions in two days. To put
that in context, that's the equivalent of a whole year's
worth of marketing that we would do to promote not
only a New Zealand services but New Zealand to the world,
so it was hugely successful.
Speaker 1 (08:29):
That's good, but it still doesn't answer my question on
whether you a pull.
Speaker 2 (08:32):
I'll come to that straight after that. I was in
Charleston and the reason I was there is that's where
Boeing manufacture the seven eight sevens, and two of us
new seven eight sevens are on the assembly line and
those are mission fit. They're being built for New York
and so we just need to get our hands on
those aircraft. There were due in May. Unfortunately there's a
(08:59):
few more issues on the Boeing side certification and otherwise,
which means they're going to be delayed to July August timeframe,
maybe this year. This year because Quantas are reading your lunch, though,
aren't they on that route. They have a better aircraft
that they're flying. The economics is slightly better, but not
that much.
Speaker 1 (09:19):
So you get that plane on, you can compete and
it's locked in and we're good to go.
Speaker 2 (09:23):
Yeah, we will have world class product on that aircraft.
It's the right aircraft, right engine, it's two of the
it's the first two long range Boeing seven eight sevens
anywhere in the world, and a new Zealand will be
taking delivery of those fantastic yeah, so we'll be ready
to go.
Speaker 1 (09:38):
Well, good luck with it all. Thank you are interesting times,
Nicol rabishenkam in New Zealand CEO. For more from the
mic Asking Breakfast, listen live to news talks. It'd be
from six am weekdays, or follow the podcast on iHeartRadio
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