Air NZ “shouldn’t really exist”

Air New Zealand “shouldn’t really exist” but is competing by not playing the same game as the “crazy” aviation industry.

In an address to the Helloworld Owner Manager Summit in Wellington, chief executive Christopher Luxon delved into the numbers and strategy that has seen the company grow by 12% this year.

“Air New Zealand is a company I’ve learned shouldn’t really exist… but we are not just surviving, we are thriving,” Luxon said.

Air New Zealand has tripled in value from one billion to three billion and is in the top three airlines in terms of financial metrics.

“The airline industry is crazy because they go off and buy hundreds of new aircraft without working out where they are going to send them to.”

We’re not playing that game, Luxon said.

Their route expansion came from identifying customer need and then ordering the aircraft, a demand-driven approach as opposed to supply-driven.

“When you set up a daily service from Sydney to Hong Kong or Auckland to Singapore that’s about $350 million worth of capital you’ve got to get together for two aircraft.”

“They cost you about $50 million just to run and they’ve got to be filled 80% of the time just to cover your costs.”

“Then when you show up in a place like Argentina like we are next week… we have to go build a massive tourism proposition on top of that and spend tens of millions of dollars as a result,” Luxon said.

Air New Zealand’s reinvestment includes spending $2.6 billion on aircraft and $100 million on new lounges, with the new Sydney and Auckland lounges costing $15 million apiece.

“That’s the sort of investment that’s needed to ensure our high value customers are well looked after.”

The aviation industry is peculiar, because it blames external circumstances for poor performance, Luxon said.

“Every airline CEO gets to stand up and say it would have been a good year but for fuel or foreign exchange, natural disasters or competition,” Luxon said.

While Air New Zealand conceded that there were uncontrollables in flying, good management minimises external volatility.

“If we have good risk mitigation but more importantly good culture, speed and agility we can respond to those circumstances better than competitors.”

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air new zealand aviation christopher luxon