Air NZ head creates 'new, viable airline with a future'

By Graeme Kennedy

Friday 13th February 2004

Air New Zealand chief executive and managing director Ralph Norris has started 2004 on a high as the region's aviation person of the year.

The accolade from the Association of Asia-Pacific Airlines' official publication Orient Aviation, recognises Mr Norris' achievements in turning the carrier around from a $1.425 billion 2001 loss six months before he took the top job to a $165.7 million profit last year.

"He has laid the foundations for a new, more viable and hopefully continuingly profitable airline in the South Pacific," the magazine said.

Mr Norris said the turnaround had not been easy, nor was it the work of one man.

"My task is to create an environment where people can think about things differently then make a difference," he said. "We are not there yet although our full-year profit is on track to be about $220 million, with a possible upside.

"We started a four-year plan to change the face of the company with a major restructure of senior management last year I had 11 people reporting directly to me and now there are eight, with only two from the original team.

"Our quarter-billion-dollar cost-cutting programme over the next three to five years will come from a range of areas. Head-count will be part of it but with growth that will include productivity increases rather than just job losses."

Air New Zealand performed well in the first half to December, with total passengers up 10.6% to 5.24 million. However, much of that growth came from the new low-fare domestic Express Class, which lifted passenger numbers 16.5% over the period, with recent months up 40%. Sars-hit international traffic rose just 2.1%.

"We will see more softness in the second half due to concerns about Asian bird flu and the negative impact of terrorism but I am confident bird flu is reasonably under control while vigilance is the key defence against terrorism," Mr Norris said.

The low-fare Tasman Express was working well on New Zealand-Australia routes, he said, and the model would be expanded regionally mid-year as Pacific Express to sub-five hour sectors such as Fiji, Rarotonga, Samoa and Tonga. Pricing would be announced next month.

With Air New Zealand's three Boeing 767-200s gone by July, Pacific Express operations would include the carrier's fleet of new Airbus A320 twinjets.

No-frills subsidiary Freedom Air would begin services to Fiji next month, while the company plans to increase the carrier's capacity to operate more services including add itional Tasman destinations.

"Freedom is a very good low-cost carrier whose competition is effectively Pacific Blue," Mr Norris said. "It will compete very well."

Air New Zealand's new tri-weekly 747 service to San Francisco from July, he said, would minimise the risk of Air New Zealand's high exposure at Los Angeles where the carrier operates 34 weekly services from Auckland, London and the Pacific Islands.

"We have set up San Francisco as an alternative destination on the US West Coast and it presents good opportunities with excellent links with Star Alliance partners United to the rest of the US and Canada and Lufthansa to Europe," Mr Norris said.

He said the company would continue to work with the Ministries of Transport and Foreign Affairs to secure Hong Kong-London traffic rights and become the industry's only round-world airline. Negotiations with UK authorities would resume late next month.

"A round-world service would give us a big plus in flexibility," he said. "People are looking for alternatives as they perceive higher terrorism risks in one part of the world we could offer an alternative route."

Mr Norris said tenders for upgraded premier-class cabins and inflight entertainment systems had gone to suppliers who would give presentations in Auckland this week. Air New Zealand would decide by the end of this month who would get the multi-million dollar contracts.

"There is an urgency," he said. "We are not competitive on long-haul."

Air New Zealand is working through preliminary proposals from Boeing and Airbus for a new jet fleet due to begin operating late next year or early 2006.

The US manufacturer is offering its 777 big-twin family against Airbus' A340-300, -500 and -600 four-engined models and its A330 twin. The new fleet would be acquired under a mix of leases and purchases.

Mr Norris said Air New Zealand and Qantas were continuing with their bid to overturn New Zealand and Australian regulatory authorities' rejections of their alliance proposal and had lodged appeals in both countries late last year.

"We still have the same message," he said. "We are small in world terms consolidation is taking place with the beginnings of mega-carriers, while airlines like Emirates are formidable competition.

"There is plenty of competition in this part of the world and given the relatively small size of the New Zealand and Australian markets it makes sense for us to work together. We believe that if New Zealand is to have a sustainable long-haul capability, it can be achieved by lowering risk through a joint-venture with Qantas."

The two carriers are already working closely in several areas including engineering to cut costs. Air New Zealand last week signed a contract to carry out heavy maintenance on 12 Qantas 747-400s and has beaten a major European carrier for similar work on Japan Airlines' jets.

The company's engineering unit also carries out maintenance for a large number of Virgin Blue 737s.

"The year ahead will be challenging as the market becomes increasingly competitive on the Tasman and Pacific," Mr Norris said.

"There is also a lot of competition between New Zealand and Europe through Asia and even South America.

"We will streamline the business and become more customer-friendly with changes and initiatives yet to be announced we are very excited about these."

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