Business Review Update
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Business Review Update
Given that Christopher Luxon announced a host of changes (not just the Seoul route and improved Business Premier), I'd thought it might be good to start a thread about all of the other items announced:
- "A new, more spacious, Economy product offering on the long haul fleet from mid-calendar 2020" (more pitch? A long-haul Space + section? Surely not back to 9 abreast on 777s?)
- "Free Wi-Fi offered on all enabled international aircraft from today"
- "The upgrade of 9 lounges across the network over the next two years for approximately $50 million, as part of the airline's previously disclosed lounge upgrade programme"
- "The progressive introduction of an enhanced Business Premier experience on the long haul fleet from the end of calendar 2019" (discussed in another thread)
- Deferring by one year the delivery of three A321neo aircraft planned to operate on the domestic network
- Deferring by two years the delivery of one A320neo aircraft designated for trans-Tasman services
- Deferring by at least four years the delivery of two long haul aircraft as part of a widebody fleet programme to replace the airline's B777-200 fleet, thereby decreasing the level of capital expenditure expected in the 2020-2023 financial years
Optimising network to maximise and diversify revenue
Air New Zealand is focused on continuously optimising its route network to ensure that the right aircraft are flying on the right routes, at the right times. Changes to the network include:- Planning for network growth of 3% to 5%, on average, over the next three years, revised from 5% to 7% to reflect a slower demand growth environment
- Network growth focused on stimulating tourism to, from and within New Zealand, by tapping into new markets of demand with the launch of additional destinations and increased frequencies across the network, including:
- The launch of new direct services between Auckland and Seoul from late November 2019
- Increased frequency on Auckland-Taipei services from November 2019 and Auckland-Chicago services from December 2019
- Amending the timing of the Auckland-Hong Kong service to free up one aircraft from late October 2019
- A moderate rate of growth is expected across the existing route network
Increasing capital efficiency through retiming of fleet orders
Aircraft capital expenditures of approximately $750 million will be deferred to ensure capacity growth better reflects the slower demand growth environment, including:- Deferring by one year the delivery of three A321neo aircraft planned to operate on the domestic network
- Deferring by two years the delivery of one A320neo aircraft designated for trans-Tasman services
- Deferring by at least four years the delivery of two long haul aircraft as part of a widebody fleet programme to replace the airline's B777-200 fleet, thereby decreasing the level of capital expenditure expected in the 2020-2023 financial years
- No change is planned for the delivery date of the airline's 14th B787-9 aircraft, which will be leased from October 2019
- As part of the airline's focus on fleet flexibility, the new widebody fleet replacement programme will include provisions that allow for an acceleration of growth, should market conditions change
Improving efficiencies across the cost base
The airline is focused on improving its operational cost base to set the airline up for success in the current lower revenue growth environment.- In addition to the ongoing cost saving initiatives of more than $50 million per annum, which have enabled Air New Zealand to largely offset inflation over the past three years, the airline will embark on a two-year cost reduction programme
- This programme is designed to deliver more than $60 million in additional savings on an annualised basis, and will be formed around three key pillars:
- Removal of inefficiencies incurred in the 2019 financial year to mitigate network and passenger disruption related to the global Rolls-Royce engine issues
- A reduction in overhead costs by approximately 5%, which will be delivered through a combination of reprioritisation of spend, process efficiencies and automation
- A targeted review of the operations cost base
Continuing to invest in the customer travel experience
Air New Zealand remains committed to elevating the customer travel experience, with a number of enhancements planned over the next two years. The airline will soon begin revealing a series of exciting new developments across its in-flight and on-the-ground product offerings, including:- The progressive introduction of an enhanced Business Premier experience on the long haul fleet from the end of calendar 2019
- A new, more spacious, Economy product offering on the long haul fleet from mid-calendar 2020
- Free Wi-Fi offered on all enabled international aircraft from today
- The upgrade of 9 lounges across the network over the next two years for approximately $50 million, as part of the airline's previously disclosed lounge upgrade programme