Nikhil Ravishankar: Air NZ CEO on their projected full-year pre-tax loss rising to $390 million

Air New Zealand's woes are expected to last for as long as the war in Iran continues. 

The national carrier's revealed its looking at staff redundancies and more flight reductions due to the surging cost of jet fuel. 

It's now forecasting a full-year pre-tax loss of up to $390 million. 

Nikhil Ravishankar told Mike Hosking run rates won't get worse, but fluctuating jet fuel prices will keep weighing on the airline's financial results.  

He says fuel dropping from $200 to $150 is helpful, but it's not down enough considering normal prices are around $85. 

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Episode Transcript

Speaker 1 (00:00):
In New Zealand. What time is it? Fifteen past seven?
Not getting any easy for in New Zealand, expectation around
the full year now looking at something as high as
three ninety million fuel bills up, two hundred and forty million,
capacities cut three to five percent. Now they're looking at
cost cutting programs and jobs. Nickel Rebi Shanker's with us morning,
Good morning. Make this seems to be unfolding fairly quickly.
Is this it? Or is there more to come this?

Speaker 2 (00:24):
If you're referring to the sort of the financial outcome
for the airline, it's tied into how long the conflict's
going to last.

Speaker 1 (00:33):
So the longer it lasts, the worse it could get
for you.

Speaker 2 (00:37):
Will necessarily get worse from a runred perspective, but it
will mean that it's a It weighs as down as
far as our financial results.

Speaker 1 (00:45):
It concern where see fuels down? So is that not
getting better for you?

Speaker 2 (00:49):
Fuel being down is helpful? But it's all context. Isn't
it normal? For us as eighty five dollars a barrel,
it's gone down from the heady height of two hundred
down to about one fifty, So it's down but not
down enough.

Speaker 1 (01:05):
I can't see it getting any worse. I mean, I
don't want to get into politics too much, but they're
not going back to war. The strait will open at
some point in some way, shape or form. So I
don't see it getting as bad as it was. Therefore,
that's a good news story ish for you, isn't it.

Speaker 2 (01:21):
I tend to agree with you. I have to be
optimistic about this. What we are seeing is the recovery
is going to be an interesting the interesting it'll take
an interesting shape. The markets have a highly backwardated sort
of forward curve.

Speaker 1 (01:41):
I e.

Speaker 2 (01:42):
That fuel will gradually but well not so gradually, actually
reduce in price down to normal. But what we're really
seeing every time a cease fire gets announced or otherwise
is it's a it's a jagged cliff, so it drops
very quickly, but it'll drop to a level which then
represent and it's the true damage to the infrastructure. And

(02:03):
from that point on, I fear that the recovery to
normal might be a slow sort of drag, a sting
in the tail.

Speaker 1 (02:11):
Can we underline the fact you won't need equity, Yes,
so you've got cash reserves that will cover this. There
is no equity required.

Speaker 2 (02:20):
That's right. We've been working on building a very big
and healthy war chest post COVID and so at this
stage that is not an issue.

Speaker 1 (02:31):
The cuts you're making in terms of services. I'm looking
at places like Europe. There was something like it was
Loft answer it was New York to London. So they're
doing like ten flights a day. They're now doing nine.
So you're squeezing the same sort of thing. You know,
you're not materially affecting people's lives or maybe even your
bottom line. Is that going to change or not?

Speaker 2 (02:51):
Yeah, this stage, you know, we've done about five percent
of consolidations, so reduced fling frequency by five percent. That
takes us out till the end of the July school holidays,
and as we speak, we're looking at whether we make
further cuts. That could be either just extending that five

(03:11):
percent of cuts into the subsequent three months or going
a little deeper. And that's the piece of work that
we're doing. Even if we were to go down a
little deeper in terms of how much cuts we take,
it won't be materially different.

Speaker 1 (03:24):
Okay, what about the company itself and the capital expenditure
and stuff like that. Is that damaging or is it
You're just going to paint the wall another day.

Speaker 2 (03:33):
In some cases we'll paint the wall another day. So
like households around the country, we're going to tighten our
belts too. We have to trim some other discretionary spending.
We are doing that, but in a lot of cases,
if it relates to running a reliable, safe, punctual service

(03:53):
for our customers, we won't be skimming on that.

Speaker 1 (03:56):
Do staff get cut, We.

Speaker 2 (03:58):
Are looking at cuts in that space, specifically in sort
of the indirect workforce.

Speaker 1 (04:05):
How many We haven't worked that out yet, Mike. Is
it teens hundreds, maybe hundreds.

Speaker 2 (04:11):
We're working through that. We are. The way I would
explain it is we're not looking at necessarily a number
for the number of people that we want to trim
the business by, but rather what discretionary initiatives and investments
we can take a pause on and that will have
a flow and impact on people.

Speaker 1 (04:30):
The upside of your statement yesterday talked about the planes returning,
So that's encouraging. What material difference does that make to
the bottom line?

Speaker 2 (04:38):
Oh, look, I mean we're in the business of flying
planes and we've had twenty percent of our assets stranded
parked up. Having them back is extremely useful.

Speaker 1 (04:47):
Yeah, but can you feel them?

Speaker 2 (04:49):
Well, that's I mean, that's the challenge of course, isn't it.
Our inbound markets are performing really well, so we need
to put them in service of tourism and trade. So
that's what we're planning on doing. In fact, on Wednesday
next week, there'll be an excitement, exciting announcement that I'm
going to make as far as where we're going to

(05:10):
put some of that extra capacity.

Speaker 1 (05:11):
All right, nice to talk to you. You have a good weekend.
I could guess, but I'm not going to. They tell
me internally that two fifty to three hundred people is
what the number they're looking at as far as jobs concerned.
Nicol rabis Shank in New Zealand Boss. For more from
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