The Kiwi Comeback

Edward Russell

January 17th, 2023

Q&A With Air New Zealand CEO Greg Foran

Greg Foran was dealt no easy task when he took the helm of Air New Zealand on February 3, 2020. New Zealand confirmed its first case of Covid-19 the same month, and closed its borders to all but citizens by March 19. A national lockdown began days later.

Fast forward three years and the situation is dramatically different. Air New Zealand is back to operating about 75 percent of its pre-pandemic capacity, and sees strong travel demand as people reconnect and eagerly hop on a plane after lengthy lockdowns. The airline recently raising its pre-tax profit forecast for the six months ending in December by as much as NZ$95 million ($61 million) to NZ$295-325 million.

Foran, a former Walmart executive in the U.S., recently spoke with Edward Russell about Air New Zealand’s outlook and plans, including for a zero-emissions aircraft demonstrator that could be carrying passengers in just three years. The interview has been edited and condensed for clarity.

Airline Weekly: The year-end holiday travel period just wrapped up, how was it for Air New Zealand?

Greg Foran: I’ve spent a bit of time out and around the network, on planes, at airports and baggage, and all the other things. There’s no doubt that customers are very keen to get out and travel. New Zealand was locked down for quite a period of time, so this is really the first Christmas in three years that people have been able to get out and reconnect in a much easier fashion. We’ve rebounded strongly and there’s been no difference between the strengths, whether it’s domestic or what we call mid-haul — over to Australia or the Pacific Islands — or long-haul. Customers are out in numbers and they’re very keen to travel.

AW: No operational disruptions?

GF: Look, I wouldn’t say there’s been no issues. I think it’s a credit to our customers and our staff that we’ve been able to get through in a reasonable fashion. But, I wouldn’t say that we’re operating like a Swiss watch by any means. We are not quite as smooth and seamless as we’d like to be, but I think everyone has appreciated that, when an industry has gone through the type of events that we have, it takes a while to build the muscle back. We’ve employed basically 2,500 people since we knew we were reopening. Getting those people trained, and up and running has been a lot of work. We’re through the main hump, if you like, of the travel season.

AW: And no staffing issues?

GF: We’ve still got more to go. We’ve got about another 400 people that we’re looking for at the moment. I would say that it continues, like in many industries, to still be a bit challenging to get people, particularly across areas such as airports. We’re not too bad in terms of pilots. We’ve done a pretty good job with cabin crew.

AW: How does 2023 look for Air New Zealand?

GF: It’s a very interesting period for us at this point. There’s no doubt we are still experiencing pent-up demand. How long that runs is a little bit of an unknown at the moment but, at this stage, it’s holding up well. I think, like many countries, we’re expecting to see some impact around disposable income as inflation bites. We’re adopting an approach that says, “We’ll be sensibly optimistic about how we see things go, but let’s be sensible about that optimism, because in reality, there will be some more capacity come back as people start to get spooled up a bit.” At the same time, there may well be some economic factors that may see a bit of a downturn.

AW: Speaking of capacity, what does the new year look like?

GF: We’ve got a business which is now running at 100 percent domestically, and we are looking to increase that. We’ve been able to put on A321neos that have about an extra 40-plus seats. That’s going to give us more capacity domestically, which we think is good. We are running at about 85 percent across the Tasman at the moment versus pre-Covid, but we’re looking to get that number up. That’s going to take us a bit of time, but hopefully by the middle of this year we’d expect to be getting that back closer to about 100 percent pre-Covid. Then international at the moment’s running at about 75 percent. We’ve got all the ports open that we want to have open. We got New York open, and loads there are pretty full. At this stage, that’s running about where we would expect.

AW: Any concerns with new competition coming into Auckland?

GF: Yeah, not particularly. I’ve been out at the airport a lot, so I’ve been watching that American plane come in from Dallas-Fort Worth. And there’s a likelihood that Delta will come in out of Los Angeles at some point; they’ve certainly mentioned that. Qantas is looking to route through Auckland to New York mid-July. We’re expecting that. We’re used to competition. It’s our home base. We’ll protect that and do what we need to, but I think it’s fair to say that we will see some new entrants come in. It will be also interesting to see how China plays out.

AW: Speaking of China, the country just recently dropped entry restrictions. How is that performing?

GF: At the moment, the passenger flights are full and we are looking to open Shanghai up from two- to three-times a week to maybe five-, six-, or seven-times a week. But we’ve kept that cadence of flying going right through the pandemic. In fact, when our plane went in there a few days ago we were the first foreign carrier to land. We didn’t plan it that way. It’s just that we were on time and a few of the other airlines were a bit late getting in so, I think, we were literally the first foreign airline with passengers not having to do quarantine to land in Shanghai.

AW: Switching gears, Air New Zealand recently launched a zero-emissions aircraft demonstrator project. Tell us more about that.

GF: We’ve got some pretty clear goals to hit and that is, first of all, to get about a 19 percent reduction in absolute carbon emissions by 2030 off a baseline of 2019. Then, like many airlines, we have a goal by 2050 to be net zero. It’s fair to say that technology is still going to have to come along and, if you like, provide the glue to ensure that we hit those goals. But, as we think about 2030, which is obviously a lot closer, we know that we need to come up with an alternative to our Dash 8-Q300 fleet. We’re looking at an electric, hydrogen electric, green hydrogen electric, or a hybrid aircraft to replace that fleet around 2030. What we’ve done is scoured the world, [and] we’ve identified, at this stage, four people that we want to go forward with in a meaningful way so that, by 2026, we’re actually running a commercial demonstrator. In other words, we’ve bought a couple of planes and we’re flying them between Auckland and Whangārei, or Auckland and Tauranga, and customers are sitting on these planes.

AW: And what about emissions from longhaul flying, which you’ve previously said are Air New Zealand’s largest source of carbon emissions?

GF: Longhaul is the big contributor. If we don’t address longhaul, then there’s 50 percent of our carbon emissions sitting there on the table. The solution there at this point needs to be sustainable aviation fuel. Our objective this financial year was to get at least 1 percent of our fuel purchases to be SAF. We’ve been able to get a delivery out of Neste from Finland routed through Singapore and down but we’ve still got more to go to get to that 1 percent.

We are in the middle of working with both private and public companies, including the government, to consider whether it is viable to build a SAF plant here in New Zealand. Could that plant be woody biomass, or would it need to be household waste? We’re in the process of completing that study with a view that, sometime this year, we should be able to assess if it is viable to stand up a plant here that we would then put capital into and build, or do we need to consider alternatives such as purchasing SAF from overseas ports, or some other type of joint venture arrangement with another country? There is no doubt that the largest portion of carbon emissions reduction is going to be SAF.

AW: On fleet, what is the status of Air New Zealand’s Boeing 787 order?

GF: We absolutely are keen on getting that order. We took the opportunity during Covid to retire eight Boeing 777-200s. They were starting to get towards the end of life. We need these next eight 787s. We haven’t made a decision as to whether they’re -9s or -10s. Certainly some of them are going to be -9s. They will be, if you like, mission-specific for ultra long-haul flights. Think Houston, Chicago, New York. As to whether or not we then put some -10s in, we haven’t made that decision, and those planes will also help, in time, to replace the 777-300s, which will be starting to get nearer the end of their life.

AW: Any other fleet segments you’re looking at for orders or replacement?

GF: We like the A321s. They’re incredibly efficient. We are having a look at what we might want to use in terms of something that could be of an international configuration. We can see some opportunities with the Pacific Islands and the Tasman. Then, of course, we’ve been progressively, over the years, increasing our fleet of the turboprops with the ATR 72-600s, and we’re having a think at the moment whether we don’t grab a few more of those.

Edward Russell

Edward Russell

January 17th, 2023