Air New Zealand Limited · NZX:AIR
Air New Zealand — Investor Day (May 2013)
94 slides from Air New Zealand's investor day presentation, May 14, 2013
Slide 1: Investor Day 2013
For personal use only Investor Day 2013 1
Slide 2: Going beyond
For personal use only Going beyond Christopher Luxon Chief Executive Officer 2
Slide 3: New Executive structure
New Executive structure For personal use only Chief Executive Officer Christopher Luxon Chief Chief Flight Chief Strategy Chief Marketing Chief Chief Chief Operations Ops & Safety & Networks & Customer Sales Officer Financial Officer People Officer Officer Officer Officer Officer Stephen Mike Norm R
Slide 4: Focusing on the controllables
Focusing on the controllables For personal use only Culture Fuel price Natural disasters Fleet Product Weather Global recessions Brand Safety Exchange rates Network 4
Slide 5: We want to be successful and significant
For personal use only We want to be successful and significant Our success is linked to New Zealand’s success Go Beyond is our guide to what really matters 5
Slide 6: Go Beyond
For personal use only QU beyond Our Significance supercharge New Zealand's success Our Success More than double our profit sustainably Who We Are A customer-centric and commercially- savvy airline focussed on the Pacific Rim How We Are We believe small actions can make a big difference to our custom
Slide 7: Our Missions
For personal use only beyond Our Missions atthe col aa the plan fighting fit awinning team TOW Live our brand always Focus on what our customers value Grow new revenue streams Play in the right markets Work with the right partners Grow through the right channels Maintain operational integrity and sa
Slide 8: What success looks like to us
What success looks like to us For personal use only An aspiration to sustainably double our 10 year earnings average* *This is not a forecast 8
Slide 9: Our Aspiration
Our Aspiration For personal use only Normalised earnings before taxation 10 year average Aspiration to10 year 10 year average sustainably double average Sustainably double Sustainably 10 year earningsPBT double average* 9
Slide 10: Who we are
Who we are For personal use only A customer-centric and commercially savvy airline focused on the Pacific Rim 10
Slide 11: Our Air New Zealand
Our Air New Zealand For personal use only We are… We are not… 11
Slide 12: A seamless transition
A seamless transition For personal use only New management New team in place functional structure January 1, 2013 A team of globally Management experienced leaders information and performance with deep systems aligned institutional to new knowledge structure 12
Slide 13: New Sales leadership
New Sales leadership… For personal use only Chief Sales Officer GGM New Zealand GM GM Americas & GM GM & Australia Asia Cargo Pacific Europe Islands 13
Slide 14: With a focus on channels & customers
..with a focus on channels & customers For personal use only ILLUSTRATIVE ONLY Our Japanese customers Business Families Yuma Yuma girls Skiers Honeymooners School kids Channels Leisure Online Group Corporate 14
Slide 15: ...and market development
…and market development 1) Market Development Objectives For personal use only Product 3) Identify product & product benefits for target segments People Price 9) Establish Sales & 4) Develop Pricing Market Development Plan resource Brand Customers 2) Define market segments & identify Partnerships ta
Slide 16: An overview of our markets
An overview of our markets… For personal use only 16
Slide 17: Domestic New Zealand
Domestic New Zealand For personal use only Competitive environment Pricing to stimulate market Acceleration of A320s bringing down cost base Unparalleled network 17
Slide 18: Tasman & Pacific Islands
Tasman & Pacific Islands For personal use only Strong market performance Virgin Australia alliance working well Seats to Suit meeting the market Improved network offering 18
Slide 19: China
China For personal use only Focus on Shanghai improving efficiency Likely launch market for 787 Refocused sales function Better in-market execution 19
Slide 20: Japan
Japan For personal use only A slowly recovering market Some recent headwinds, primarily weak Yen We are adjusting our marketing accordingly ANA alliance 20
Slide 21: North America
North America For personal use only Capacity growth to meet demand New competition with Hawaiian growth New LAX terminal, better transit experience 21
Slide 22: Europe
Europe For personal use only Exit Hong Kong-London route Focus now on Los Angeles-London market Making excellent progress 22
Slide 23: A virtuous circle
A virtuous circle For personal use only grow profit grow control sustainable revenue costs returns to shareholders invest in our business 23
Slide 24: Becoming fit to win
Becoming fit to win For personal use only energised management team renewed focus on market sales execution relentless cost control and resource optimisation proactive pursuit of growth opportunities We are firing on all cylinders 24
Slide 25: Executing the plan
For personal use only Executing the plan Stephen Jones Chief Strategy & Networks Officer 25
Slide 26: Our Domestic core
Our Domestic core For personal use only Strong and growing… Simple Deep network end-to-end and schedule journey Detailed Modern yield fleet management 26
Slide 27: The Tasman
The Tasman For personal use only Structurally better and growing… Seats Growing to market Suit Virgin Virgin alliance investment 27
Slide 28: Air New Zealand & Virgin Australia
Air New Zealand & Virgin Australia For personal use only A powerful partnership… Returning the Tasman to growth Trans-Tasman alliance is a compelling customer proposition Results are now clear Lower fares More passengers More connecting journeys New city pairs Growth Re-authorisation process now und
Slide 29: We are now 1.2 airlines
We are now 1.2 airlines For personal use only The Virgin investment by the numbers… $300m 27 cps 18% 516m NZD value to Air NZ of Air NZ shares held @ 48 cps investors market cap In addition to our improved core business, the investment provides: An economic exposure to the faster growing Australian
Slide 30: International
International For personal use only Steadily improving… Network Costs portfolio reducing upgraded Ancillary Fleet revenue efficiency 30
Slide 31: Reshaping International
Reshaping International For personal use only Creating structural advantage through partnerships Focus on Pacific Rim markets Direct flights Strong economic growth Exiting markets where no competitive advantage exists e.g. Hong Kong–London Growing the network around deep partnerships Leveraging home
Slide 32: Alliances
Alliances For personal use only A quickly changing landscape… Immunised revenue share arrangements emerging as preferred consolidator Global alliances remain very important – but don’t meet all needs Deeper cooperation on specific markets required Partner choice within global alliance may be limited
Slide 33: Cathay Pacific
Cathay Pacific For personal use only A strong Hong Kong partner Deep local distribution and brand strength Product and brand aligned with Air New Zealand proposition Alliance authorisation for Auckland-Hong Kong sector only Early results encouraging Exit Hong Kong-London without compromising Aucklan
Slide 34: Ideal new market characteristics
Ideal new market characteristics For personal use only 1. Market size to support 2-3 market volume, 7. Conduct weekly services 2. Higher quality and advantage - network, yielding growth traffic mix competitive cost or > Bus/VFR advantage product 6. Ideal 3. Strong Structural new historical advantage
Slide 35: New market focus on Pacific Rim
New market focus on Pacific Rim For personal use only Strong existing traffic flows High growth Direct flights Partnerships 35
Slide 36: Conclusion
Conclusion For personal use only Playing in the right markets Working with the right partners Australasian business portfolio Pacific Rim network focus 36
Slide 37: Customers at the core
For personal use only Customers at the core Mike Tod Chief Marketing & Customer Officer 37
Slide 38: Kia ora
For personal use only Ze. AIR NEW ZEALAND ‘o_ kia-ora
Slide 39: Air New Zealand - among the best
Air New Zealand - among the best Ip
Slide 40: For personal use only
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Slide 41: Our brand performance
our La brand . performance TRUSTWORTHY/ INNOVATIVE / RELIABLE INSPIRING PROUD NZ BRAND OVER BEARING (Spanning from 2007 to 2012) Air New Zealand Market Monitor - conducted by TNS
Slide 42: Liberating from the ordinary
2 S liberating from the ordinary’ we do things differently
Slide 43: For personal use only
For personal use only 43
Slide 44: Globally one of the best
a S globally one of the best
Slide 45: For personal use only
For personal use only 45
Slide 46: For personal use only
the Both follow each others curve _ AIR W ZEALAND 00a00
Slide 47: For personal use only
For personal use only 47
Slide 48: All Blacks
ALL BLACKS Ajuo sn feuosied 103
Slide 49: For personal use only
For personal use only 49
Slide 50: For personal use only
For personal use only 50
Slide 51: For personal use only
For personal use only 51
Slide 52: Safety video campaign results
For personal use only Air New Zealand store front visits increased 14” bookings ¢p% increased 8 on YTD benchmark (average all markets) during safety video campaign
Slide 53: Engagement
Xb engagement Ajuo sn feuosied 103
Slide 54: Airpoints membership growth
1,500,000 1,000,000 500,000 0% FY10 @ TOTAL FY11 FY12 FY13 YTD Airpoints Membership growt Ip wth
Slide 55: Cornerstones of growth and engagement in Airpoints
ss Cornerstones Of The Growth And Engagement In Airpoints Have Been: © Thecreation of new features like shairpoints © Stronger relationships with partners like Fly Buys and banks © Product Development - One Smart For personal use onl <p
Slide 56: Grabaseat membership growth
pp grabaseat Membershi growth fe) 100,000 200,000 300,000 400,000 500,000 %, \ \ \ \ \ YTD 497K
Slide 57: Customer experience
For personal use only <p Customer e experience
Slide 58: The customer experience journey
For personal use only The customer, exp erience , Journey .
Slide 59: Digital engagement
For personal use only digital engagement
Slide 60: Digital engagement
For personal use only divital engagement
Slide 61: Customer insights
For personal use only @ Customer @ insights “pp
Slide 62: For personal use only
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Slide 63: Personalising customer data
For personal use only Personalisin customer ata If you're having trouble reading this email, view &
Slide 64: Ka kite
For personal use only ie. AIR NEW ZEALAND ‘o_ ka kite
Slide 65: A winning team
For personal use only A winning team Lorraine Murphy Chief People Officer 65
Slide 66: What we are known for
What we are known for For personal use only New Zealand Employer of Choice Excellent reputation Strong and proud culture Talented, hard working people Depth of experience Constructive partner relationships 66
Slide 67: Core HR priorities
Core HR priorities For personal use only Engagement & culture Diversity Leadership Performance Sales capability Succession planning Employee relations Talent Our efficiency and effectiveness Workforce planning 67
Slide 68: Leadership
Leadership For personal use only Brand… “That’s an Air New Zealander” What is ours Management foundation and leadership is additive A Leadership Development framework Join Companies Leave Leaders 68
Slide 69: Leadership, culture, engagement, performance
Leadership For personal use only Leadership Culture Engagement Performance 69
Slide 70: Talent strategies
Talent strategies For personal use only Leaders are talent managers Talent identification and development framework Attraction of talent Emerging leaders 70
Slide 71: Performance
Performance For personal use only Differentiated Consequential Supported by core processes Driving a culture… of high performers 71
Slide 72: Fighting fit
For personal use only Fighting fit Bruce Parton Chief Operations Officer 72
Slide 73: New Operations structure
New Operations structure For personal use only Chief Operations Officer Technical Airline Regional Supply Operations Operations Airports Cabin Crew Airlines Chain 73
Slide 74: Without operational integrity, we don't have an airline
Without operational integrity, we don’t have an airline… For personal use only 74
Slide 75: Simplifying our fleet
Simplifying our fleet For personal use only today tomorrow B737 A320 A320 Fuel efficiency = Operational savings B747 Better customer experience B777 B767 B787 B777 75
Slide 76: Investing in continuous improvement
Investing in continuous improvement For personal use only No stone unturned… Project Choice IBM call centres Ongoing initiatives 76
Slide 77: A new approach to airports
A new approach to airports For personal use only New structure under experienced GGM Airports John Whittaker Next wave of technology improving customer ground experience New ground handling contracts Investment in mobile technology 77
Slide 78: Tech Ops
Tech Ops For personal use only 2600 staff 3 subsidiary companies 1.8 million productive man hours 40% for third party contracts 78
Slide 79: Changing maintenance requirements
Changing maintenance requirements For personal use only Modern aircraft with longer maintenance intervals Legacy fleet maintenance simplified Significantly less man hours required going forward 79
Slide 80: Focusing on what the customer values
Focusing on what the customer values For personal use only B787 entry into service B777-200 upgrade Lounge upgrades (CHC, AKL, LAX) New ATR72-600s on regional + upgraded existing -500s Improved check-in experience Seamless journeys through our integrated network 80
Slide 81: Delivering a superior customer experience
Delivering a superior customer experience For personal use only 81
Slide 82: Consistency is important
Consistency is important For personal use only smooth arrival great Arrive on time Bags out quickly flight efficient Leave on time Friendly service boarding Get what I expect simple How late can I leave it? check-in Space for my Choose my seat carry-on? Drop my bag Quick and easy 82
Slide 83: Regional airlines
Regional airlines For personal use only An integral part of our wider network Superior servicing of small towns and regional centres Regional economy remains challenging Fleet flexibility (ATR72 Q300 B1900D) Agile business equipped to respond quickly to market 83
Slide 84: Fighting fit
Fighting fit For personal use only Our tempo as a business has increased New, more efficient organisation structure Simplifying, less maintenance intensive fleet Focusing on what the customer values Relentless focus on effective cost management 84
Slide 85: Financial management
For personal use only Financial management Rob McDonald Chief Financial Officer 85
Slide 86: Agenda
Agenda For personal use only Capital Management Hedging Fleet Loyalty IT at Air New Zealand 86
Slide 87: Capital management
Capital management For personal use only Fleet activity in next 3 years will shift leverage from lower end of targeted leverage range of 45% -55% Fleet funding will be supported by: Cash generating at operating level Debt Maturity Profile $NZm as at 30 June 2012 Strong liquidity 350 300 Excellent ac
Slide 88: Hedging
Hedging For personal use only Air NZ undertakes hedging programmes to give the business time to adjust to material changes in: Jet fuel Foreign exchange rates Moving to all Brent hedging Fuel hedge Position 78% hedged to 30 June 2013 The first half of FY14 is 54% hedged FX hedging programme progress
Slide 89: Fleet
Fleet For personal use only Fleet inductions in 2013 3 x A320 2 x ATR72 Fleet inductions in the next 3 years Calendar Year 2014 2015 2016 B777-300ER 2 B787-9 3 3 2 A320 3 4 ATR72 1 1 1 89
Slide 90: Fleet
Fleet For personal use only Fleet exits B747 – 2014 B737 – 2015 B767 – 2015 (under review) By 2016 Longhaul fleet – 777/787 Short haul jet fleet – A320 Average Jet age (seat weighted) will fall to 6.5 years by Dec 2016 90
Slide 91: Loyalty
Loyalty For personal use only Significant upgrading of leadership capability Appointed General Manager with external loyalty programme experience New leadership team to drive: Engagement Commercial potential Focus in coming year: Increased engagement with partners to grow airpoints earning Gold/Gold
Slide 92: Loyalty
Loyalty For personal use only Membership grown to 1.36m, up 18% YOY Over $1b NZD in Airpoints rewards have been redeemed by Airpoints members since 2004 Airpoints direct earn credit card accounts up 6% (industry average growth 0.7%) Total card spend up 10% YTD YOY (industry average 3.5%) March 2013
Slide 93: IT at Air New Zealand
IT at Air New Zealand For personal use only Major enabler of change A leading IT department in New Zealand – 255 people, flex with contractors Resilient, highly available infrastructure footprint across two Tier III sites Reservation System In-house Low cost Flexible – speed to market Focus in comin
Slide 94: Questions?
For personal use only Questions? 94