Air New Zealand Limited · NZX:AIR
Air New Zealand — Investor Day (June 2014)
80 slides from Air New Zealand's investor day presentation, Jun 19, 2014
Slide 1: Investor Day 2014
y<e AIR NEW ZEALAND Xo, Investor Day 2014
Slide 2: Chief Executive Officer
For personal use only Chief Executive Officer
Slide 3: Moving from Good to Great
Moving from Good to Great For personal use only Customer Experience Commercial Engaged Results Culture
Slide 4: Strong foundations
Strong foundations For personal use only > Passionate, engaged workforce > Customer centric culture > Optimised network > Strong growth mindset
Slide 5: More than double our profit sustainably
beyond ap More than double our profit sustainably FIGHTING FIT * Maintain operational integrity & safety always + Deliver a seamless journey every time + Simplify our business to drive out cost and complexity EXECUTE THE PLAN + Play in the right markets * Work with the right partners * Grow through
Slide 6: Strategic priorities
For personal use only Strategic priorities
Slide 7: Continuing to improve our network
Continuing to improve our network For personal use only > Pacific Rim focus > Axing underperforming routes • Hong Kong-London • Auckland-Osaka > Deploying capacity into high yielding growth markets > Doing the right deals with the right partners
Slide 8: Further fleet upgrades
Further fleet upgrades For personal use only > A320/A321 NEO (New Engine Option) > 13 aircraft on order, first delivery in 2017 > Replace existing regional A320 fleet > Highlights a commitment to fleet simplicity and operating efficiency A320 A320 NEO
Slide 9: Investing for the customer
Investing for the customer For personal use only > Multiple lounge upgrades underway > Self check-in kiosks for international flights > Refresh of Loyalty programme > Ongoing inflight product improvements, i.e. B777-200 refurbishment
Slide 10: Advances in mobility
Advances in mobility For personal use only > Introduction of new mobile app > Online check-in now available > Developing mobile as a sales channel
Slide 11: New Domestic proposition
New Domestic proposition For personal use only > Four new options > Increased flexibility for customers > Available anytime
Slide 12: Continuous cost improvement
Continuous cost improvement For personal use only > Fleet efficiencies and simplicity > Transformational labour improvements > Creation of new Business Performance unit > Offsetting CPI increases
Slide 13: Partnering together for New Zealand's success
Partnering together for New Zealand’s success For personal use only
Slide 14: Developing a winning team
Developing a winning team For personal use only > Improving on what already makes us great > Talent development framework > Driving a high performance culture
Slide 15: Improving our return on equity
Improving our return on equity For personal use only ROE >15%
Slide 16: Thank you
lb thank you Ajuo esn jeuosied 105
Slide 17: Chief Sales & Commercial Officer
For personal use only Chief Sales & Commercial Officer
Slide 18: Domestic
Domestic For personal use only > Unmatched network offering > A320 product now majority of Domestic capacity > Solid demand as economic growth continues > Further capacity coming > New Domestic proposition
Slide 19: Tasman
Tasman For personal use only > Virgin Australia alliance = best network offering Australasia > Maintaining market leading position on the Tasman > Seasonal services performing strongly > Lower AUD impacting performance
Slide 20: International
International For personal use only > Network realignment has driven improved profitability > Capacity increases in growing and high performing markets > First of two additional leased B777-300s now in service > B747-400 exiting > B787-9 arriving > Pacific Rim growth
Slide 21: China
China For personal use only > Big opportunities, big challenges > 787 ideally configured for this market, will bring improved efficiency > Traffic numbers increasing > Working to grow yields
Slide 22: Japan
Japan For personal use only > Steadily recovering following last year’s Yen devaluation > Exited Osaka, concentrating on Tokyo > Heavily inbound tourist dominated market > ANA alliance
Slide 23: North America
North America For personal use only > Additional capacity to meet demand > Improved LAX experience with move to new terminal > Economic conditions to support growth > Focus on market development
Slide 24: Europe
Europe For personal use only > Balancing point-to-point traffic with New Zealand outbound traffic > Winning corporate accounts out of Los Angeles and London markets > Strong demand for premium trans-Atlantic product
Slide 25: Cargo
Cargo For personal use only > Global Cargo market continues to be challenging > Opportunities in Asia, particularly Singapore > Growing a virtual network
Slide 26: Ancillary revenue
For personal use only Ancillary revenue
Slide 27: Broadening our distribution
Broadening our distribution For personal use only > Leveraging the combined power of direct distribution and long term agreements with our trade partners
Slide 28: Thank you
lb thank you Ajuo esn jeuosied 105
Slide 29: Chief Marketing & Customer Officer
For personal use only Chief Marketing & Customer Officer
Slide 30: Our brand
Our brand For personal use only > Net Promoter Score remains around historic highs > #1 corporate reputation in New Zealand > Top 10 corporate reputation in Australia > Most followed corporate NZ brand on Twitter and Facebook
Slide 31: Innovative brand engagement continues
Innovative brand engagement continues For personal use only > We are seeing strong returns on key international campaigns in all markets “ItteQ” “Blind Gate” TV show campaign “You are the One” Hobbit TV show Campaign
Slide 32: Safety videos now driving revenue
Safety videos now driving revenue For personal use only
Slide 33: An exciting year ahead for our brand
An exciting year ahead for our brand For personal use only > Brand architecture global rollout > 787 global campaign > Third Hobbit movie > Rugby World Cup buildup > Air New Zealand’s 75th anniversary
Slide 34: Working with great partners
Working with great partners For personal use only v
Slide 35: Customer experience
Customer experience For personal use only > Our renewed focus on customer experience that kicked off last year is delivering positive results > Research shows a clear uplift in customer satisfaction in Q1 across key touch points, including: Lounges Inflight product Inflight entertainment Onl
Slide 36: Customer experience
Customer experience For personal use only “Air New Zealand remains the star performer when it comes to performance across the customer service landscape with a Happiness Rating of .” Kiwihost Perceptions of Customer Service Survey 2014
Slide 37: Awards
Awards ap NUNWOOD experience excellence COPENHAGEN | THE ARCTIC T Condé Nast iltlics. TOP 100 vA > a “Airline Ratings
Slide 38: Customer engagement
Customer engagement For personal use only > Airpoints membership up 15% YOY > Programme refresh completed > Realigned incentives to reward most valuable customers > High Value Customer satisfaction levels up
Slide 39: Our customers are more engaged than ever before
“Our customers are more engaged than ever before” or personal use only
Slide 40: Thank you
lb thank you Ajuo esn jeuosied 105
Slide 41: Chief Operations Officer
For personal use only Chief Operations Officer
Slide 42: Operations Integrity
Operations Integrity For personal use only > Safety is paramount and non negotiable > We are committed to delivering world class flight operations every day > 13 million passengers carried on 200,000 flights annually > 11,000 staff
Slide 43: Airports
Airports For personal use only > Further improving process, productivity as fees increase > New suppliers for ground handling > Lounge upgrades completed or in progress Christchurch Auckland Domestic Auckland International Sydney Los Angeles
Slide 44: Tech Ops
Tech Ops For personal use only > Wide body heavy maintenance disestablished > Further investment in equipment and componentry > Increasing cooperation with Virgin Australia
Slide 45: Regional airlines
Regional airlines For personal use only > Demand in regional markets is steadily growing > Capacity increasing as new ATR72-600s enter service > Up-gauging to larger, more efficient aircraft on regional routes Cost per ASK
Slide 46: A relentless focus on cost
A relentless focus on cost For personal use only > We can’t save our way to prosperity, but we can be smarter on costs > Fleet simplification providing platform for next phase of cost improvement > Scope exists to improve on our already competitive cost base > New Business Performance Group created
Slide 47: Business Performance Group
Business Performance Group For personal use only > Target cost base improvements to offset CPI increases > Lead continuous improvement initiatives > Benchmark costs > Leave no stone unturned
Slide 48: High Performance Engagement
High Performance Engagement For personal use only > We are collaborating with unions on a new way of working together > People affected by a problem are directly involved in solving it > This partnership approach is designed to produce improved economic results and better engagement with our unions
Slide 49: Conclusion
Conclusion For personal use only > Opportunities exist for continuous cost savings going forward > Fleet simplification provides a strong platform for cost reduction > Existing improvements will continue compounding
Slide 50: Thank you
lb thank you Ajuo esn jeuosied 105
Slide 51: Chief Strategy, Networks & Alliances Officer
For personal use only Chief Strategy, Networks & Alliances Officer
Slide 52: How we approach planning
How we approach planning For personal use only > The strategic playbook process > Integrating external forces with internal plans to shape 5 year outlook and near term priorities
Slide 53: Annual rhythm
For personal use only Annual rhythm
Slide 54: Macroeconomic trends driving growth
Macroeconomic trends driving growth For personal use only < Shift in global economic centre of gravity < Urbanisation, wealth and aging population < Technological changes < Increased environmental awareness
Slide 55: Reinforcing our strategic focus
Reinforcing our strategic focus For personal use only < Shift in global economic centre of gravity < Urbanisation, wealth and aging population < Technological changes < Increased environmental awareness
Slide 56: Global perspective
For personal use only Global perspective
Slide 57: Network strategy
For personal use only Network strategy
Slide 58: Alliances
Alliances For personal use only > Building a better customer offering
Slide 59: Our key alliances
Our key alliances For personal use only Hong Tokyo Kong *subject to regulatory approval
Slide 60: Cathay Pacific alliance
Cathay Pacific alliance For personal use only > Performing well > Good product alignment between carriers > A powerful partner in North Asia > Hong Kong a vital gateway to Mainland China
Slide 61: Proposed Singapore Airlines alliance
Proposed Singapore Airlines alliance For personal use only > Air New Zealand to re-commence flying to Singapore > Codeshare on Singapore Airlines and SilkAir networks > A credible alternative for UK/Europe traffic > Accelerates strategy of Pacific Rim growth > Subject to regulatory approval
Slide 62: Alliance would open up new destinations
Alliance would open up 50 new destinations For personal use only
Slide 63: Virgin Australia alliance
Virgin Australia alliance For personal use only > A powerful partnership which is returning the Tasman to growth > Value of Alliance demonstrated to regulators Reauthorised until October 2018 Limited capacity conditions > Successfully upgrading business proposition in key markets
Slide 64: Virgin Australia equity interest
Virgin Australia equity interest For personal use only > An economic exposure to the fast growing Australian market > United and supportive group of airline shareholders > Board seat to be taken up, equity accounting to follow
Slide 65: Thank you
lb thank you Ajuo esn jeuosied 105
Slide 66: Chief Financial Officer
For personal use only Chief Financial Officer
Slide 67: Strong fundamentals
Strong fundamentals For personal use only * As at 31 December 2013
Slide 68: Benign debt maturity profile
Benign debt maturity profile For personal use only > $150m bond repayment due in FY17
Slide 69: Capital management
Capital management For personal use only > Current low gearing reflects maturing fleet and will rise due to significant fleet replacement activity over the next 3-5 years > Forecast to stay comfortably within target range of * As at 31 December 2013
Slide 70: Investment grade rating
Investment grade rating For personal use only > Moody’s investment grade rating, outlook stable > Currently one of only 4 airlines globally > Well positioned to access financial markets
Slide 71: Funding strategy
For personal use only Funding strategy
Slide 72: Aircraft financing options
Aircraft financing options For personal use only
Slide 73: Funding mix
Funding mix For personal use only Wide body Narrow body Turboprops Owned Finance Lease Op Lease Debt Finance
Slide 74: Aircraft deliveries
Aircraft deliveries For personal use only Boeing 787-9 1 2 3 2 2 Airbus A320 4 4 2 - - ATR72-600 1 3 2 - - Boeing 777-300ER* 1 1 - - - Airbus NEO - - - - 3 * Subject to operating lease arrangements
Slide 75: Fleet age
Fleet age For personal use only > Average seat weighted fleet age of > Forecast to decline further in coming years as deliveries ramp up
Slide 76: Fleet efficiency
Fleet efficiency For personal use only > Continuing fleet modernisation adds up to material fuel savings per ASK 11% 15% 19% 28%
Slide 77: A simplifying fleet
A simplifying fleet For personal use only B747-400 B777-300 B777-300 B777-200 B777-200 B787-9 B767-300 A320 A320 B737-300
Slide 78: Hedging position
Hedging position For personal use only > Our hedging programmes to give us time to adjust to material changes in: Jet fuel Foreign exchange rates > Primarily comprised of Brent hedging > The second half of FY14 is * > The first half of FY15 is * > FX hedging programme progressing unadjusted * As a
Slide 79: Conclusion
Conclusion For personal use only > Solid financial position, robust liquidity > Strong operating cash flow > Excellent credit access > Optimal fleet for missions and network > Well positioned to deliver growth
Slide 80: Thank you
lb thank you Ajuo esn jeuosied 105