August 29, 2024 • 10 mins
Air New Zealand's CEO isn't holding back his frustration about the issues plaguing some of its engines.
The airline's earnings, underlying profit, and net profit have all more than halved.
Air New Zealand is one of several airlines that have seen planes taken out of action due to engine issues.
CEO Greg Foran says the newer planes have been plagued by engine issues - creating problems for the airline.
"The older planes we've got, we're not having to take engines off and get them all serviced. But the newer ones - we did."
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Tough times for Air New Zealand. Net profit after tax
was down sixty five percent on last year to just
under one hundred and fifty million dollars, and earnings before
tax came in at less than half what it was
the previous year. Greg for is Air New Zealand's chief executive. Hey, Greg,
hi there, Why are you guys doing so much worse
than quantus?
Speaker 2 (00:17):
Well, it's all relative to what you're dealing with at
the time. Is then easy answer to that?
Speaker 1 (00:22):
What are you dealing with that they're not dealing with?
Speaker 2 (00:23):
Well, they don't have the same engines on their planes
that we do. And interestingly, at the moment, if you
have a very new fleet, it's actually a bit of
a disadvantage. So the older planes we've got, we're not
having to take engines off and get them all serviced,
but the newer ones we did. Engine issue start well
initially with the Trent you go back to about twenty seventeen,
(00:44):
but the decision to put the Trent Rolls Royce was
made in two thousand and four. We put it on
the first of the Dreamliners.
Speaker 1 (00:52):
In the last financial year as well, it's got worse
because they had a better year than you last year
as well. It feels like it's developing into a passage.
Speaker 2 (00:59):
Well, the other thing that's happened, Heather, is that it's
not just a trend engine. We're now dealing with six
Pratt and Whitneys which go on our very good air
bus fleet. So right today we've actually got ten planes
or a billion dollars worth of capital that we're trying
to get engines.
Speaker 1 (01:15):
I can tell me the whole thing is pinned on
the engines.
Speaker 2 (01:18):
The other things that we deal with it are a
bit different. You know, the economy in Australia is a
bit different than New Zealand at the moment. So that's
the second thing. So we're seeing, for example, government spends
minus twenty eight percent, no surprises on that. And then
the third thing that's a bit different is that we've
got about a fifty two percent increase in capacity from
(01:40):
USA Alliance flying in here. So when you add all
of those things up, to be honest, it's worth probably
a couple one hundred.
Speaker 1 (01:49):
Million dollars break out of this, like can you actually
beat this stuff?
Speaker 2 (01:51):
For sure? And the reason the reason I say that
is that the fleet stuff does come right. You know,
the supply chain gets all and the economy everyone gets right.
The economy comes right, so that will run.
Speaker 1 (02:03):
Come you deal with your competitive stuff, the fact that
you have got this competition issue now.
Speaker 2 (02:08):
The same way you deal with any competitor. You ensure
that what you're delivering for your customers and your staff
is superior. So, you know, give us a couple of months,
we'll have a retrofit completed. We should have nine completed
next year, and then we've got a product on our
Dreamliners which you combine with the Air New Zealand service.
I'll stack that up against anyone. Yeah, you know, anyone
(02:30):
from Australia, anyone from the US, and I'll tell you
we'll deliver a fantastic experience for our customers.
Speaker 1 (02:37):
Let's talk about the customer experience, right, which is what
you say would be your competitive advantage. The trouble I
see it at the moment is that the ticket price
is are driving customers away, aren't they? I mean, you
see Jetstar doing really well in the last financial year,
which has got to be a straight switch from more
expensive airlines to them. So and your tickets are going
to go up again, aren't they.
Speaker 2 (02:54):
Yeah, of course, what you're seeing is you're seeing combined results.
You're not seeing Jetstar necessarily separate rated out between the
two areas. What I'll tell you about New.
Speaker 1 (03:03):
Zealand, the earnings have gone up twenty three percent.
Speaker 2 (03:06):
And combined, that's combined Australia.
Speaker 1 (03:08):
Oh yeah, I see what you mean, Ossie and using
So let's let's.
Speaker 2 (03:12):
Talk about the market that we operating, because we don't
operate domestically. Actually, our prices are down. So I know
a lot of people on last year, Oh how it
happen because what we're seeing is is no, what you're
seeing is actually a softer market domestically all the reasons
that we just spoke about. Yeah, so you know, I
was looking at the numbers for July, so July this
(03:33):
year July last year. We're down three to four four
domestically on both turboprops and jets. Same thing actually across
the Tasman and same thing on international. So pricing actually
has come down, and that's one of the reasons that
we're seeing, you know, a weaker profit result.
Speaker 1 (03:50):
Do you interspate having to put the prices up again?
Speaker 2 (03:53):
Look, so much of that is dependent on demand, So
you know, if the American airlines don't come next year
at the same level they are now. And you've just
heard me say they're they're up fifty two percent on
where they were previously. That's a lot of extra seats.
Then generally what happens is you'll start to see some
movement in pricing. At the moment, traffic between China and
(04:15):
the US is still only operating at twenty five percent
pre COVID, so there's some spare planes around. So you know,
pricing moves around a bit. It's always hard to pick
where it's going. But look, I'm pretty comfortable with where
we're sitting at the moment. There is a good reason,
a good set of reasons as to why our numbers
are what they are and other airlines aren't. Not all
(04:36):
airlines are operating the same planes, Not all of them
are operating in the same economy.
Speaker 1 (04:41):
Not all of.
Speaker 2 (04:43):
Them are dealing with competition.
Speaker 1 (04:45):
And three recessions in two years. On the other thing
about customer experience, Are you as excited as I am
about being forced to report your on time performance to
the government.
Speaker 2 (04:53):
We already do.
Speaker 1 (04:54):
You reported on your website.
Speaker 2 (04:56):
Absolutely, and it's not really marrible.
Speaker 1 (04:58):
With jet staff. The comparison. But are you excited about
this totally?
Speaker 2 (05:03):
By the wise a rocket And by the way, well,
actually it won't because I already see it, because I
already see the numbers, Heather, So I know exactly what
the numbers.
Speaker 1 (05:11):
You've got to do better, though you can't tell me
you're not going to do better.
Speaker 2 (05:14):
We always do better, Heather, He don't, and that is
exactly what we do. We actually improved on time performance
last year.
Speaker 1 (05:21):
You might have done, but you still have a situation
where as many as one in five of your flights
are running later than fifteen minutes. That's unacceptable.
Speaker 2 (05:29):
That's why we're working hard to improve it. But it's
ahead of our actual competitor. So I see those numbers.
I'm not concerned if they're public. As I said, they
already are, and I welcome that. And here's the other
thing that we do. We are incredibly diligent around safety.
So I won't compromise on time performance ever for safety.
And one of the things that I have to acknowledge
(05:51):
is a fantastic job that our people do dealing with
these fleet issues. Heather has us doing many will let.
Speaker 1 (05:58):
Me finish it, but you're doing a diversion to because
I want to talk about it on time performance because
here's the problem, Greg, is that it feels a little
bit like you guys take us for granted because we're
so loyal to you that if you're an hour late,
we just have to put up with it. Well, is
that what's going on?
Speaker 2 (06:11):
I'm going to finish and then I'm going to deal
with that.
Speaker 1 (06:13):
Okay, can you finish? And then okay?
Speaker 2 (06:16):
One of the things our engineers are having to do,
and they're doing a fantastic job in an engineering and mating,
so they're having to do twice as many engine changes
at the moment, So they're working really hard to keep
this fleet going. When you got tenty your best plane
sitting on the ground, you can't fly on time. Performance
is as important to us as it is to a customer,
because if you think about it, this whole thing is
(06:38):
a network and a schedule. Yes, the same reason that
I hate cancelations, I really do because you end up
with the plane and the crew and the wrong places.
So it doesn't suit us to not operate like a
Swiss watch. Now, we'll always do it with safety, and
I can tell you it is a key priority we
just don't talk about it. We've got lots of tools
out now out there now that we're doing to help
(07:00):
improve the performance, and it has improved.
Speaker 1 (07:03):
And do you think that when you are doing a
straight comparison with Jetstar to MB who's going to publish
this stuff, that you will win every single time?
Speaker 2 (07:11):
I can tell you that over the last twelve months.
I think we have run one eight times in the
last twelve months.
Speaker 1 (07:18):
Okay, and you'll see that I see most of the time. Yeah, okay.
Are you Are you of the view which which grant
from tourism holdings hold, which is that if the government
puts up the charges of the visas, we are going
to actually repel some tourists.
Speaker 2 (07:34):
I'm of the view that and I've learned this over
many years as a retailer that generally the higher the prices,
the less demand. There is few light time.
Speaker 1 (07:43):
So are you worried about that?
Speaker 2 (07:45):
I am, And I would say it's concerning, and it's
it's not just you know, visas, and we've seen what's
happened there. There's discussions around the iv L. We've seen
you CIA come out in the last few days and say, hey,
we haven't moved prices twenty sixteen, so you know, we
need to move on this, and we need to move
on that. And we've spoken previously about airport costs and
(08:07):
countering and all those things. The reality is, individually each
can be justified. Collectively, you could be talking three to
four hundred dollars more for someone internationally if they've got
to get a vent, all the other family right to
come in. Yeah, what's that going to do. It's going
to suppress demand.
Speaker 1 (08:25):
Okay, smart, not a smart idea.
Speaker 2 (08:28):
I think you've got to be really cautious. And I
don't think it's as simple as saying we're going to
do nothing. But I think you have to look at
the system as a whole and you need to say, collectively,
this is going to cause X amount of drop off
in demand or Y amount of drop off in demand,
and then try and thread that needle. My concern at
(08:48):
the moment is that if you're doing it in a
piecemeal fashion, each individual component can be justified, but the
whole is not going to be palatable. So I am
concerned about that.
Speaker 1 (09:00):
Okay, me too. One other thing, do you think that
we should limit the number of drinks at the airports?
To two.
Speaker 2 (09:08):
I can tell you that we in Air New Zealand
do a pretty good job of controlling what people are drinking.
But what if they jump in the in the in
the carou club, Well, our staff deal with that and
they and they deal with that appropriate. And I saw
the I saw the article.
Speaker 1 (09:26):
From is he going a bit far making it?
Speaker 2 (09:30):
He's trying to make a point And I've met him
and and good on him for doing it. And Michael
O'Leary runs a fantastic business.
Speaker 1 (09:37):
A different class of passenger, isn't he. Yeah?
Speaker 2 (09:39):
And can I tell you what we see, for example,
on a flight to Balley is a bit different than
what you might get on a flight to La So
our team deal with it, and you know, if it's
an issue, we'll sit down and have a look at it.
I don't think we need to do it right now.
Speaker 1 (09:56):
Fair enough, Greg, thank you very much, really appreciate a
Greek for him, Chief executive at a news you like.
For more from Hither Duplessy Allen Drive, listen live to
news Talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
Tough times for Air New Zealand. Net profit after tax
was down sixty five percent on last year to just
under one hundred and fifty million dollars, and earnings before
tax came in at less than half what it was
the previous year. Greg for is Air New Zealand's chief executive. Hey, Greg,
hi there, Why are you guys doing so much worse
than quantus?
Speaker 2 (00:17):
Well, it's all relative to what you're dealing with at
the time. Is then easy answer to that?
Speaker 1 (00:22):
What are you dealing with that they're not dealing with?
Speaker 2 (00:23):
Well, they don't have the same engines on their planes
that we do. And interestingly, at the moment, if you
have a very new fleet, it's actually a bit of
a disadvantage. So the older planes we've got, we're not
having to take engines off and get them all serviced,
but the newer ones we did. Engine issue start well
initially with the Trent you go back to about twenty seventeen,
(00:44):
but the decision to put the Trent Rolls Royce was
made in two thousand and four. We put it on
the first of the Dreamliners.
Speaker 1 (00:52):
In the last financial year as well, it's got worse
because they had a better year than you last year
as well. It feels like it's developing into a passage.
Speaker 2 (00:59):
Well, the other thing that's happened, Heather, is that it's
not just a trend engine. We're now dealing with six
Pratt and Whitneys which go on our very good air
bus fleet. So right today we've actually got ten planes
or a billion dollars worth of capital that we're trying
to get engines.
Speaker 1 (01:15):
I can tell me the whole thing is pinned on
the engines.
Speaker 2 (01:18):
The other things that we deal with it are a
bit different. You know, the economy in Australia is a
bit different than New Zealand at the moment. So that's
the second thing. So we're seeing, for example, government spends
minus twenty eight percent, no surprises on that. And then
the third thing that's a bit different is that we've
got about a fifty two percent increase in capacity from
(01:40):
USA Alliance flying in here. So when you add all
of those things up, to be honest, it's worth probably
a couple one hundred.
Speaker 1 (01:49):
Million dollars break out of this, like can you actually
beat this stuff?
Speaker 2 (01:51):
For sure? And the reason the reason I say that
is that the fleet stuff does come right. You know,
the supply chain gets all and the economy everyone gets right.
The economy comes right, so that will run.
Speaker 1 (02:03):
Come you deal with your competitive stuff, the fact that
you have got this competition issue now.
Speaker 2 (02:08):
The same way you deal with any competitor. You ensure
that what you're delivering for your customers and your staff
is superior. So, you know, give us a couple of months,
we'll have a retrofit completed. We should have nine completed
next year, and then we've got a product on our
Dreamliners which you combine with the Air New Zealand service.
I'll stack that up against anyone. Yeah, you know, anyone
(02:30):
from Australia, anyone from the US, and I'll tell you
we'll deliver a fantastic experience for our customers.
Speaker 1 (02:37):
Let's talk about the customer experience, right, which is what
you say would be your competitive advantage. The trouble I
see it at the moment is that the ticket price
is are driving customers away, aren't they? I mean, you
see Jetstar doing really well in the last financial year,
which has got to be a straight switch from more
expensive airlines to them. So and your tickets are going
to go up again, aren't they.
Speaker 2 (02:54):
Yeah, of course, what you're seeing is you're seeing combined results.
You're not seeing Jetstar necessarily separate rated out between the
two areas. What I'll tell you about New.
Speaker 1 (03:03):
Zealand, the earnings have gone up twenty three percent.
Speaker 2 (03:06):
And combined, that's combined Australia.
Speaker 1 (03:08):
Oh yeah, I see what you mean, Ossie and using
So let's let's.
Speaker 2 (03:12):
Talk about the market that we operating, because we don't
operate domestically. Actually, our prices are down. So I know
a lot of people on last year, Oh how it
happen because what we're seeing is is no, what you're
seeing is actually a softer market domestically all the reasons
that we just spoke about. Yeah, so you know, I
was looking at the numbers for July, so July this
(03:33):
year July last year. We're down three to four four
domestically on both turboprops and jets. Same thing actually across
the Tasman and same thing on international. So pricing actually
has come down, and that's one of the reasons that
we're seeing, you know, a weaker profit result.
Speaker 1 (03:50):
Do you interspate having to put the prices up again?
Speaker 2 (03:53):
Look, so much of that is dependent on demand, So
you know, if the American airlines don't come next year
at the same level they are now. And you've just
heard me say they're they're up fifty two percent on
where they were previously. That's a lot of extra seats.
Then generally what happens is you'll start to see some
movement in pricing. At the moment, traffic between China and
(04:15):
the US is still only operating at twenty five percent
pre COVID, so there's some spare planes around. So you know,
pricing moves around a bit. It's always hard to pick
where it's going. But look, I'm pretty comfortable with where
we're sitting at the moment. There is a good reason,
a good set of reasons as to why our numbers
are what they are and other airlines aren't. Not all
(04:36):
airlines are operating the same planes, Not all of them
are operating in the same economy.
Speaker 1 (04:41):
Not all of.
Speaker 2 (04:43):
Them are dealing with competition.
Speaker 1 (04:45):
And three recessions in two years. On the other thing
about customer experience, Are you as excited as I am
about being forced to report your on time performance to
the government.
Speaker 2 (04:53):
We already do.
Speaker 1 (04:54):
You reported on your website.
Speaker 2 (04:56):
Absolutely, and it's not really marrible.
Speaker 1 (04:58):
With jet staff. The comparison. But are you excited about
this totally?
Speaker 2 (05:03):
By the wise a rocket And by the way, well,
actually it won't because I already see it, because I
already see the numbers, Heather, So I know exactly what
the numbers.
Speaker 1 (05:11):
You've got to do better, though you can't tell me
you're not going to do better.
Speaker 2 (05:14):
We always do better, Heather, He don't, and that is
exactly what we do. We actually improved on time performance
last year.
Speaker 1 (05:21):
You might have done, but you still have a situation
where as many as one in five of your flights
are running later than fifteen minutes. That's unacceptable.
Speaker 2 (05:29):
That's why we're working hard to improve it. But it's
ahead of our actual competitor. So I see those numbers.
I'm not concerned if they're public. As I said, they
already are, and I welcome that. And here's the other
thing that we do. We are incredibly diligent around safety.
So I won't compromise on time performance ever for safety.
And one of the things that I have to acknowledge
(05:51):
is a fantastic job that our people do dealing with
these fleet issues. Heather has us doing many will let.
Speaker 1 (05:58):
Me finish it, but you're doing a diversion to because
I want to talk about it on time performance because
here's the problem, Greg, is that it feels a little
bit like you guys take us for granted because we're
so loyal to you that if you're an hour late,
we just have to put up with it. Well, is
that what's going on?
Speaker 2 (06:11):
I'm going to finish and then I'm going to deal
with that.
Speaker 1 (06:13):
Okay, can you finish? And then okay?
Speaker 2 (06:16):
One of the things our engineers are having to do,
and they're doing a fantastic job in an engineering and mating,
so they're having to do twice as many engine changes
at the moment, So they're working really hard to keep
this fleet going. When you got tenty your best plane
sitting on the ground, you can't fly on time. Performance
is as important to us as it is to a customer,
because if you think about it, this whole thing is
(06:38):
a network and a schedule. Yes, the same reason that
I hate cancelations, I really do because you end up
with the plane and the crew and the wrong places.
So it doesn't suit us to not operate like a
Swiss watch. Now, we'll always do it with safety, and
I can tell you it is a key priority we
just don't talk about it. We've got lots of tools
out now out there now that we're doing to help
(07:00):
improve the performance, and it has improved.
Speaker 1 (07:03):
And do you think that when you are doing a
straight comparison with Jetstar to MB who's going to publish
this stuff, that you will win every single time?
Speaker 2 (07:11):
I can tell you that over the last twelve months.
I think we have run one eight times in the
last twelve months.
Speaker 1 (07:18):
Okay, and you'll see that I see most of the time. Yeah, okay.
Are you Are you of the view which which grant
from tourism holdings hold, which is that if the government
puts up the charges of the visas, we are going
to actually repel some tourists.
Speaker 2 (07:34):
I'm of the view that and I've learned this over
many years as a retailer that generally the higher the prices,
the less demand. There is few light time.
Speaker 1 (07:43):
So are you worried about that?
Speaker 2 (07:45):
I am, And I would say it's concerning, and it's
it's not just you know, visas, and we've seen what's
happened there. There's discussions around the iv L. We've seen
you CIA come out in the last few days and say, hey,
we haven't moved prices twenty sixteen, so you know, we
need to move on this, and we need to move
on that. And we've spoken previously about airport costs and
(08:07):
countering and all those things. The reality is, individually each
can be justified. Collectively, you could be talking three to
four hundred dollars more for someone internationally if they've got
to get a vent, all the other family right to
come in. Yeah, what's that going to do. It's going
to suppress demand.
Speaker 1 (08:25):
Okay, smart, not a smart idea.
Speaker 2 (08:28):
I think you've got to be really cautious. And I
don't think it's as simple as saying we're going to
do nothing. But I think you have to look at
the system as a whole and you need to say, collectively,
this is going to cause X amount of drop off
in demand or Y amount of drop off in demand,
and then try and thread that needle. My concern at
(08:48):
the moment is that if you're doing it in a
piecemeal fashion, each individual component can be justified, but the
whole is not going to be palatable. So I am
concerned about that.
Speaker 1 (09:00):
Okay, me too. One other thing, do you think that
we should limit the number of drinks at the airports?
To two.
Speaker 2 (09:08):
I can tell you that we in Air New Zealand
do a pretty good job of controlling what people are drinking.
But what if they jump in the in the in
the carou club, Well, our staff deal with that and
they and they deal with that appropriate. And I saw
the I saw the article.
Speaker 1 (09:26):
From is he going a bit far making it?
Speaker 2 (09:30):
He's trying to make a point And I've met him
and and good on him for doing it. And Michael
O'Leary runs a fantastic business.
Speaker 1 (09:37):
A different class of passenger, isn't he. Yeah?
Speaker 2 (09:39):
And can I tell you what we see, for example,
on a flight to Balley is a bit different than
what you might get on a flight to La So
our team deal with it, and you know, if it's
an issue, we'll sit down and have a look at it.
I don't think we need to do it right now.
Speaker 1 (09:56):
Fair enough, Greg, thank you very much, really appreciate a
Greek for him, Chief executive at a news you like.
For more from Hither Duplessy Allen Drive, listen live to
news Talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
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