So Air New Zealand says its wants to “sustainably double our 10-year earnings average” of $NZ170 million. That means the airline has to report profits before tax of $NZ340 million. This year the land of the long white cloud’s flag carrier reckons its “normalised earnings before tax” may be between $NZ235 million and $NZ260 million. Air New Zealand chief executive Christopher Luxon gave no timeframe for when the airline can reach its goal in an investor presentation today. Even without a timeframe, the target looks out of reach.
It’s hard to see the airline garnering more revenue from its home market where it is not, surprisingly, the dominant carrier. New Zealanders, a persimmons lot, may not fasten their seatbelts in increasing numbers while economic growth remains subdued. The economy grew 1.5 per cent in the three months to March 2012 and a drought this year will negatively impact growth. The central bank is busily intervening in the foreign exchange markets to ensure the country’s primary exports remain competitive. The effects of the Christchurch earthquake, notwithstanding forecasts of increased building activity, still dampen the economy. Air New Zealand has yet to resolve allegations of price fixing with NZ’s antitrust agency.
Luxon says the airline is “customer centric” and “focused on the Pacific rim”. But the company has shown little initiative in Asia. It is focused on the Japanese market, whose rapidly aging peoples may not want to bungy jump, jet boat ride or hike between mountain huts. It does not fly to South Korea, a nation of 50 million people who sends their sons and daughters in increasing numbers outside the country to study or travel. Luxon in his presentation today had a single line on China: “focus on Shanghai (sic) improving efficiency.”
The airline is turning itself, judging by travel this year on its aircraft, into a no frills, budget carrier. Depending on the ticket bought, meals and video entertainment may have to be paid for in flight. Air New Zealand seemingly wants to fill its planes with cost-conscious customers and a sprinkling of “suits” that have no other option but to fly Air New Zealand to make their appointments. The airline is providing a budget service. Check in procedures are done by customers themselves. Recent experiences at Sydney and Wellington airports are evidence the airline does not have adequate personnel to deal with a deluge of customers checking in oversized baggage, having problems with getting a boarding pass printed or simply wanting a simple query answered. The contrast between Air New Zealand and Asian carriers, who are laser-like focused on offering personal yet highly efficient customer service, could not be any greater.
Air New Zealand’s ranking among world airlines has slipped to 17th in 2012 from seventh in 2011, according to the World Airline Awards which rank regional rivals Asiana, Singapore and Cathy Pacific, two, three and four respectively. Air New Zealand uses the country's greatest brand, the national rugby union team, the All Blacks, to advertise its service. But the airline is no All Blacks who have compiled a 76 per cent winning record in test matches over more than a century.
In New Zealand trading, the airline's shares rose 3 cents, or 2 per cent, to $NZ1.53, bringing its 12-month gain to 71 per cent. In Australia, the company’s shares added 3.5 cents, or 2.9 per cent, to $1.26 at 1:20 pm AEST. The stock is up 83 per cent in the past year.