An update from our CEO 2020-06-05

Old Jun 4, 20, 8:49 pm
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An update from our CEO 2020-06-05

Kia ora mmonster [someone in my household and it is surprising they are communicating to the person with the most basic membership tier first],



COVID-19 has taken an enormous toll on our business. Our revenue has dropped from $6 billion a year to just a fraction of that, we have gone from carrying almost 18 million customers a year to flying just a few thousand a day, and we have just gone through a round of consultation that will see nearly 4,000 Air New Zealanders leave the business. It’s a challenge unlike any we’ve faced before.

Fast-forward 800 days and my vision is of a successful airline that:





Takes care of our customers better than any other airline on earth



Is operationally efficient and excellent at all we do



Enables Kiwis to fly again domestically and internationally to countries free of Covid-19



Plays a critical role in helping the New Zealand economy get back on its feet and



Shares the success of New Zealand as its proud national carrier
However, in order to get there we have a tough road ahead of us. We first need to Survive, then Revive, and finally Thrive – and I’d like to take the time to share with you an outline of our 800 day plan.
Please enjoy reading the themes of our 800 day plan which will ultimately deliver even greater care and experiences to you – our customers.

Survive

The Survive platform of our plan is likely to run until the end of August this year. We have to cut costs across the business and already we have sadly said farewell to 4000 Air New Zealanders.

Survive is a whole-of-company approach and no area is immune. We have had to start radically overhauling our cost base. From grounding our 777 fleet to deferring expenditure on new aircraft, hangers and parking; seeking savings across contracts in our supply chain and leases for aircraft; Executive roles, office space and even company vehicles. We are leaving no stone unturned. Our wage bill is down by a third now but our revenue has fallen by more than two thirds. We need to balance the scales further.

Today, we start Phase 2 to remove around $150 million from our wages bill as part of a suite of other changes to our cost base to put Air New Zealand in the shape to be able to meet our 800-day ambition for August 2022.

We will be immediately engaging with Air New Zealanders and their union representatives as we investigate how best to reduce the labour bill. We are open to all options that help meet our cost saving goals, but I do want to be clear that we need to brace ourselves for more discussions around redundancies, leave without pay, reduced hours and voluntary exits. Thinking this through carefully will be important so that as the airline regains more customers and routes we are ready to take that volume on. I am really sorry that we are in a situation of needing to reduce our wages bills further, but I believe this is what we need to do with some urgency to get through the Survive phase.

As you know Air New Zealand finds itself in a predicament unlike any it has faced before. We’ve had challenges for sure, but never one where our revenue has effectively evaporated from $6 billion last year to almost nothing for a couple of months. Revenue will slowly return but in the next financial year it is likely to be less than half what we used to earn. This has put our finances under great stress.

In this Survive platform we must develop new ways of working, become more flexible and adaptive to what we are facing and with it we will simply stop doing some activities. If we get this right, this will be an exciting period of reinvention to help set us up for the next phase - Revive. Some of Air New Zealand’s greatest innovations came out of the dark days of Ansett and the Global Financial Crisis – and we’ll do all we can to encourage that same level of creativity and innovation again.

Revive

We expect to spring into the Revive section of our journey from 1 September, if we have completed the Survive platform and reduced our cost base to match the much smaller business we are than pre-COVID-19. We are also hopeful that around this time the nation will well and truly have returned to Level 1 and that Tasman and Pacific Island flying could be returning for leisure and business travellers.

However, we are not factoring a return to long haul flying of any note until next year. We believe that until there is a vaccine, effective treatment or elimination of the disease in key markets, the New Zealand Government will not fully open its borders for growth in long haul air travel.

That said one glimmer of hope of late has been the extra cargo movements, which are helping the economy and our cashflow as well as the heartening support we are seeing in domestic travel.

Nevertheless, the reality is that during our Revive period we will be a much smaller airline, growing gradually as routes open and customer confidence returns. We will use this phase to develop new products and services, while creating innovative ways to encourage Kiwis to travel for business and leisure. Importantly, digital will be at the core of all we do. Air New Zealand’s customer experience of tomorrow must mirror that which consumers expect of a leading digital company, otherwise, we will not be relevant and we’ll fail to meet our full potential.

So, Thrive

We are determined to get through the next 800 days, so that by August 2022 we hit the Thrive section of our plan, when we will be a digital company that monetises through aviation and tourism in a very sustainable manner. This will be a time where our customers, stakeholders, shareholders and all Air New Zealanders benefit from the hard work and innovation of the Survive and Revive phases of our journey.

As we Thrive we will not focus on size, but on quality. We will be smaller, flying fewer routes but we will not change our outstanding reputation for care, compassion and heart. The pride that comes with being our country’s national carrier. These values stand us apart. We will also lead in areas relating to climate change, particularly carbon emissions.

Our airline will operate with precision and humanity. Our domestic jet and regional operations are highly efficient and need to be for our business customers. The Tasman and Pacific Islands offer the best value option for all our customers. International is focused on an excellent product offering and delivery for our business and premium leisure customers. Supported by best in class digital products across all fleets, allowing for seamless customer and staff interaction which improves the experience and reduces our costs. We will not only recognise our customers but understand them and know how they feel, which will allow us to offer world class service always and to exceed expectations wherever it matters most in their journey with us. If we can nail all that, I am hopeful that we may even be a bit bigger than the 70% of our former size that we are preparing for. And we owe it to all the Air New Zealanders who have left us through redundancy, or who are on furlough, or who are on reduced hours, to achieve that and to get them back into the airline full time. They are our whānau.

Every airline in the world has been stunned by the COVID-19 pandemic. This event is not a hiccup; very few airlines will return to the former ways of working. The survivors will be more focused, lower cost and provide better customer service. We want to thrive in this environment, realising our ambition to take care better than any other airline on earth. Together we can make this happen.

Thank you for your ongoing support of our airline in this difficult time.

Ngā mihi nui,

Greg Foran

CEO
mmonster is offline  
Old Jun 4, 20, 9:27 pm
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Refunds?

All very well and very fluffy bits about loving their customers but nothing about refunds. I'm not personally affected but I'm sure many people are who need the cash and don't have government millions to fall back on
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Old Jun 4, 20, 10:07 pm
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An airline as a digital business? Thought airlines flew planes.

Or has he eluded to Air NZ being a VR airline only
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Old Jun 4, 20, 11:46 pm
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'we will not change our outstanding reputation for care, compassion and heart.'

Is this Air NZ we are talking about?
ieuan1 is offline  
Old Jun 5, 20, 12:33 am
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It's just a long, fluffy message to announce more job losses
minz56 is offline  
Old Jun 5, 20, 12:43 am
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My first reaction from the email was the over use of the word "digital". I understand the importance of technology a modern airline must have but is digital their core business as he worded it?
Xiaotung is offline  
Old Jun 5, 20, 12:56 am
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It's a shame we have to wait 800 days before they realise their vision of an airline that "Takes care of our customers better than any other airline on earth". Some people surely need the cash from prepaid flights now.
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Old Jun 5, 20, 2:13 am
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If feel like NZ is going to end becoming an short-haul only airline, over the next couple of years.
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Old Jun 5, 20, 4:06 am
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Originally Posted by oranjemakker View Post
Refunds?

All very well and very fluffy bits about loving their customers but nothing about refunds. I'm not personally affected but I'm sure many people are who need the cash and don't have government millions to fall back on
Maybe people should be pressuring the Govt rather than Air NZ. I'm sure if the Govt were willing to give then a few hundred million interest free that they'd happily credit everybody.
sbiddle is offline  
Old Jun 5, 20, 5:45 am
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I often wonder why people like that are so detached from reality.

To say that they were going to take of customers better than any airline on earth, but at the same time currently violating the laws and contract and carriage by not refunding passengers....

maybe the real change comes with the change of executives and management.
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Old Jun 5, 20, 11:49 am
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Originally Posted by smartytravel View Post

To say that they were going to take of customers better than any airline on earth, but at the same time currently violating the laws and contract and carriage by not refunding passengers....
Could you please quote the relevant laws and contract of carriage section that Air NZ are violating?

Even the head of Consumer NZ has been forced to admit Air NZs decision to not refund is 100% compliant with current NZ laws so I'm really interested to know what law you believe they are breaking.
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Old Jun 5, 20, 12:17 pm
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Originally Posted by sbiddle View Post
Could you please quote the relevant laws and contract of carriage section that Air NZ are violating?

Even the head of Consumer NZ has been forced to admit Air NZs decision to not refund is 100% compliant with current NZ laws so I'm really interested to know what law you believe they are breaking.
Consumer Guarantees Act of 1993, Article 30.
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Old Jun 5, 20, 12:38 pm
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Originally Posted by smartytravel View Post
Consumer Guarantees Act of 1993, Article 30.
Air Travel is covered under CAA laws.

As already mentioned the head of Consumer NZ after weeks of attacking Air NZ has begrudgingly had to admit that Air NZ are not breaking any laws. Are you saying he is wrong?
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Old Jun 5, 20, 3:37 pm
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Originally Posted by sbiddle View Post
Air Travel is covered under CAA laws.
Be that as it may the provision of air travel services to consumers is a service under the Consumer Guarantees Act and Air NZ is required to comply with the service guarantees in that Act.

What the Act does not do is mandate refunds. That issue remains subject to Air NZ’s terms and conditions, which provide for a refund only in limited circumstances including whether a delay is within Air NZ’s control. A health event (epidemic/pandemic) is defined to be a delay outside Air NZ’s control.

The issue then becomes whether a particular flight cancellation is one due to a health event (no refund, credit only) or whether it is due to a scheduling decision made by Air NZ. If the latter, one then has to determine whether the no refund clause will trigger if the scheduling decision was made due to a lack of demand caused by a health event. Air NZ would no doubt argue it would, but that is probably where their decision not to pay a refund is most susceptible to a successful legal challenge.

At the end of the day, NZ sees a world in the foreseeable future where there will be reduced international services from other airlines into New Zealand (and likely less demand), and a domestic space where it will continue to be the dominant carrier. In those circumstances, with customers having relatively few options to turn to, it has obviously made a decision that the monetary effect of this perceived brand damage is not likely to exceed the immediate monetary cost of issuing refunds.
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Old Jun 5, 20, 7:16 pm
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Originally Posted by mmonster View Post

Fast-forward 800 days and my vision is of a successful airline that:
...

Enables Kiwis to fly again domestically and internationally to countries free of Covid-19
Well, I guess that means I won't be flying Air NZ again for at least 2-3 years. No wonder I didn't receive the e-mail!
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