Our national airline is making less money on its long-haul routes and aircraft engine issues are keeping a lid on growth. Should it remain an international airline?
Air New Zealand is barely making enough money on some international routes to cover the cost of operating them, according to its chief executive, as its capacity is constrained due to ongoing aircraft engine issues.
“We are still making money on these routes but nowhere near the extent that we need to, and not enough to cover the cost of capital,” Greg Foran told Markets with Madison.
The pressure on some long-haul revenue, for example its Americas network, was fuelled by increased competition from international airlines.
So why should the 51% Government-owned airline bother playing the international game?
“Number one, it’s part of our purpose, connecting the world. Number two, we’ve got a responsibility to move cargo in this country,” Foran said.
“And number three, there are actually routes that are pretty good for us.”
Air New Zealand chief executive Greg Foran and one of its expensive assets - an aircraft engine. Photo / Cameron Pitney
Profitability of routes changed all the time, and the airline kept an open mind to respond to that, Foran said.
In the past few years it had pulled out of routes to London, Chicago and Buenos Aires, and added flights to New York, Tokyo, Singapore, Bali, Fiji, Samoa and Tonga.
“[Air New Zealand has a] $200 million piece of machinery that can move. We can decide to point that machinery to South America or we can decide to point it up to Asia.”
It was considering pointing an aircraft toward India in the future.
But growth in its flying capacity was constrained with 10 of its aircraft out of action due to engineering maintenance schedule surprises with Rolls-Royce and Pratt & Whitney-manufactured engines.
An unusable Airbus aircraft in Air New Zealand's hangar at Auckland Airport. Photo / Cameron Pitney
“This is a brand new A321, with no engines,” Foran told Markets with Madison inside its hangar at Auckland Airport.
It was one of a handful of aircraft parked up with missing parts, unable to fly.
“Can you imagine how I feel?”
Go inside Air New Zealand’s hangar with Greg Foran, and hear him discuss profits and pricing, in today’s episode of Markets with Madison above.
Markets with Madison takes you inside Air New Zealand's engineering hangar to see aircraft under maintenance up close. Photo / Cameron Pitney
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
