Nikhil Ravishankar: Air NZ CEO on their projected full-year pre-tax loss rising to $390 million
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What is the main topic discussed in this episode?
Air New Zealand, what time is it? Fifteen past seven. Not getting any easier for Air New Zealand. Expectation around the full year now looking at something as high as $390 million.
What financial challenges is Air New Zealand currently facing?
Fuel bills up $240 million. Capacity's cut three to five percent. Now they're looking at cost-cutting programs and jobs. Nicol Rabishank is with us this morning. Good morning, Mike. This seems to be unfolding fairly quickly. Is this it or is there more to come?
What cost-cutting measures is Air New Zealand considering?
This, 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.
So the longer it lasts, the worse it could get for you?
It won't necessarily get worse from a run rate perspective, but it will mean that it weighs us down as far as our financial results are concerned.
See, fuel's down.
So is that not getting better for you? Fuel being down is helpful, but it's all context, isn't it? Normal for us is $85 a barrel. It's gone down from the heady heights of 200 down to about 150. So it's down, but not down enough.
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.
How long could the financial difficulties last for Air New Zealand?
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?
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, it'll take an interesting shape. The markets have a highly backwardated sort of forward curve, i.e. that fuel will gradually, well, not so gradually, actually reduce in price down to normal. But what we're really seeing every time a ceasefire gets announced or otherwise is it's a jagged cliff. So it drops very quickly, but it'll drop to a level which then represents the true damage to the infrastructure. And from that point on, I fear that the recovery to normal might be a slow sort of drag, a sting in the tail.
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.
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.
The cuts you're making in terms of services, I'm looking at places like Europe. There was something like, it was Lufthansa, it was New York to London. So they're doing like 10 flights a day. They're now doing nine. So you're squeezing the same sort of thing. You're not materially affecting people's lives or maybe even your bottom line. Is that going to change or not?
Yeah, at this stage, you know, we've done about 5% of consolidations. So reduce flying frequency by 5%.
How are fluctuating fuel prices impacting Air New Zealand's operations?
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 5% 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.
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?
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 of the discretionary spending. We are doing that. But in a lot of cases, if it relates to running a reliable, safe, punctual service for our customers, we won't be skimming on that. Do staff get cut? We are looking at cuts in that space, specifically in sort of the indirect workforce. How many? We haven't worked that out yet, Mike.
Is it teens, hundreds, maybe hundreds?
We're working through that. 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 investments initiatives and investments we can take a pause on, and that will have a flaw and impact on people.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–0:07
2
What financial challenges is Air New Zealand currently facing?
0:07–0:23
3
What cost-cutting measures is Air New Zealand considering?
0:23–1:15
4
How long could the financial difficulties last for Air New Zealand?
1:15–2:59
5
How are fluctuating fuel prices impacting Air New Zealand's operations?
2:59–5:31
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