Air New Zealand seeks to delay Boeing 787 deliveries, cut costs in strategic reset
Air New Zealand's Strategic Reset and Financial Outlook
By Julie Zhu and Shruti Agarwal
June 30 (Reuters) - Air New Zealand said it would seek to delay Boeing 787 deliveries, cut more costs and look to appeal to premium tourists as part of a strategic reset aimed at returning the loss-making carrier to profitability over the next two years.
Delays in Boeing 787 Deliveries
The later-than-expected arrival of two 787 Dreamliners due to manufacturing issues has made its capital spending profile too heavy in the financial year starting on July 1, outgoing Chief Financial Officer Richard Thomson said on an investor call.
Those planes had previously been expected in the financial year ending June 30, and as a result of the delays the airline is working with Boeing to postpone other deliveries, he said.
Boeing declined to comment, saying it deferred to Air New Zealand on the matter.
Impact on Capital Spending and Operations
Air New Zealand has 10 787s on order and it is looking to trim spending at a time when elevated fuel costs due to the Middle East conflict have piled onto existing pressures, leading the company to forecast its largest pre-tax annual loss in four years in May, and impose two rounds of fare increases.
The company on Tuesday noted significant operational and financial pressures in the past few years, including aircraft and engine availability constraints, rising aviation system costs and a weak New Zealand economy.
Financial Performance and Cost-Cutting Measures
Profitability Timeline and Loss Guidance
When asked whether the airline could return to profit in the financial year ending June 30, 2027, Thomson said: "I'd see FY27 as a transitional year."
The carrier said it was looking to cut NZ$100 million ($56.45 million) of costs in FY27. Its FY26 loss guidance of NZ$340 million to NZ$390 million before tax remains unchanged and analysts do not expect it to return to a pre-tax profit until FY28, according to estimates compiled by LSEG.
Fuel Prices and Hedging Strategies
CEO Nikhil Ravishankar said high fuel prices, and particularly an unusual spike in refining margins due to the Iran conflict, "have added further volatility and uncertainty" to the airline's outlook.
Thomson said Air New Zealand had begun hedging the refining margin, which was rare among airlines before the conflict. The carrier is 76% hedged on Brent crude at the high $70s per barrel in the first half as well as 20% on the refining margin at $35 to $40 a barrel, he said.
Strategic Focus on Premium Tourism
Targeting Premium Leisure Customers
Ravishankar said the airline would pivot to targeting inbound premium leisure customers — long-haul travellers who choose New Zealand as a "bucket list" destination and value a distinctively Kiwi experience.
Network Connections and Customer Experience
Those visitors could then connect through the airline's domestic and regional networks, he said.
Leadership Changes
The company said Thomson, who has served in his role since early 2021, will be replaced as finance chief by Kris Cudmore, an Air New Zealand infrastructure, planning and commercial executive, on August 3.
($1 = 1.7715 New Zealand dollars)
(Reporting by Julie Zhu in Hong Kong and Shruti Agarwal in Bengaluru; Editing by Maju Samuel, Sahal Muhammed and Jamie Freed)
