CEO restarts efforts to make Air NZ profits fly

Friday 18th May 2001

By Graeme Kennedy

With the Ansett 767 groundings behind him, Air New Zealand group chief executive Gary Toomey is counting some wins among the losses caused by the $5 million crisis.

And he is back working on the same strategies to lift the troubled carrier as he was before the Australian Civil Aviation Safety Authority's action took the 10 jets out of the air on Easter holiday eve.

Despite lost revenues, damaged credibility and costs associated with the groundings, Mr Toomey said there were positive signs for Ansett from the market and the carrier's staff.

"Our passengers have not stayed away so we go back to where we started," he said. "We are at status quo and on course to continue our investment programme in Ansett.

"The 767 groundings have not changed our basic strategies. We have begun profile and brand advertising and we will launch Ansett's domestic and international product enhancements later this year.

"Surveys show customers' intentions to travel with us again are up 12%, 63% said we handled the crisis well and 55% believe Casa was wrong to take the action it did."

Mr Toomey said the airline had received "phenomenal support" during the crisis from staff, unions, the travel industry, passengers, frequent flyers and corporate customers - "We didn't really realise the support that was there or the underlying value of the Ansett brand," he said.

"The groundings galvanised the staff in Australia in much the same way as Air New Zealand staff reacted to help move passengers after the collapse of Qantas New Zealand.

"The morale was better here, as the Australian staff were still suffering from uncertainty and a lack of investment by the airline's previous owners, but the Air New Zealand operations in Australia (when the carrier sent its 767s to help Ansett through the crisis) did in a tangible way show what we were trying to do by integrating the two companies.

"Our biggest challenge has been how to bring the staff with us in integration but they now see the benefits of working together and they are excited about it."

But the 767 crisis was Mr Toomey's show. He gave almost 200 interviews, press conferences and television appearances in the weeks following the Easter groundings. He mixed with Ansett staff in the workshops and terminals, on the tarmacs and check-in desks, quickly raising his own profile after only a few months in the job.

He pointed out that Ansett staff had not had visible leadership - such as his former boss James Strong provided at Qantas. "They needed a "visible focal point," he said.

"In recent years, Ansett staff have had different people at the top, good people but not visible," Mr Toomey said. "Now the feedback we are getting is that they feel they have a leader out there who is working on their behalf."

The main plank of strategy to increase Ansett's 42% market share and profitability is replacement of its ageing fleet - the 767s were among the world's oldest - and the Air New Zealand board is expected to discuss a finance package proposed by investment bank Salomon Smith Barney at its August meeting.

Mr Toomey said finance arrangements could include an equity-debt mix, vendor financing, straight leasing and a combination all the options. The company has been in preliminary discussions with both Boeing and Airbus and expected to announce its choices by the end of this year.

Meanwhile, the Ansett 767s - eight of which are flying with two undergoing scheduled heavy maintenance - have been conditionally sold to US giant General Electric's leasing division and will be leased back.

Air New Zealand would also need new aircraft for replacement of older models and more capacity to handle passenger growth, Mr Toomey said.

"It may be that as markets grow Air New Zealand could move to larger aircraft on international routes - perhaps 777s for 767s or more 747s while on the Tasman the 737s could be up-graded to 767s to provide more capacity.

"The strategies are there. The next step is for the board to sort out the funding requirements. Then there will be the re-fleeting and other enhancements."

For Air New Zealand, they include fitting new Singapore Airlines-style interiors, introducing elements of Ansett International's business class product - voted the world's best and featuring trained on-board chefs - and delivering a more personal service from both cabin and flight crews.

Domestically, Air New Zealand has accelerated its plans to upgrade its domestic services to head off Qantas' expected full domestic operation in partnership with Nelson-based Origin Pacific next month.

Qantas has been flying a limited cut-price trunk network in competition with Air New Zealand subsidiary Freedom since May 1 to clear passengers booked on its collapsed franchisee Qantas New Zealand.

Air New Zealand, in a move to preserve the 85% market share it gained after the collapse, is offering in-flight videos, new and up-graded lounges, electronic check-in and the first direct Auckland-Dunedin flights for 10 years in a bid to keep its newly won customers.

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