Air New Zealand flying high on soaring demand but its CEO doesn’t expect any price dives

Air New Zealand, a fierce competitor on trans-Tasman routes with code share partner Qantas, does not see signs of substantially lower flight prices in the short term.

Air New Zealand is spending much of the proceeds from a return by travellers on infrastructure improvements.

Air New Zealand boss Greg Foran says he expects flight prices to fall over the medium to long term, but has signalled that with rising costs and soaring demand, they would be elevated for the time being.

Speaking to The Australian from The Air New Zealand office at Auckland Airport, the former US boss of the discount department store and grocery chain Walmart said more flights would help ease flight price pressure.

“That will primarily be a function of capacity coming back in and that in turn will get driven by all the joys of the supply chain and ecosystem coming together,” Mr Foran said.

“My guess is that most airlines today would like to be able to fly more because the demand is still quite strong.”

Air New Zealand, a fierce competitor on trans-Tasman routes with code share partner Qantas, is 52 per cent owned by the New Zealand government. As a result, the airline’s primary objective was connecting people in New Zealand and globally, Mr Foran said.

The carrier that employs about 11,000 people is now fully staffed and has recently increased wages about 15 per cent for the lowest-paid workers to about $NZ30 ($28) an hour, including penalty rates.

After a $NZ1.2bn capital raising last year, the trans-Tasman carrier has low debt – 32.7 per cent at $NZ903m.

Mr Foran said that Air New Zealand was using much of the proceeds from the uptick in travel on capital spending, investing in $NZ450m refurbishing 14 of its 787s, $NZ140m on a new hangar at Auckland airport and digital improvements on its back-end systems. It has been flying its entire fleet.

“Our objective is to come back as quickly as we can, and we even have pushed ourselves over that to the extent we had to get a lease … to fly Auckland to Perth,” he said.

Mr Foran said Air New Zealand was “still flat out” training some of its 600-odd pilots to fly different planes.

The New Zealand carrier, which is listed in Australia with a $2.6bn market value as well as on the NZX, has disposed of eight end-of-life, non-fuel-efficient Boeing 777-200 aircraft and bought back 777-300s, taking its wide-body fleet to 21 from 29.

It has a new 787 Dreamliner wide-bodied plane arriving around the end of the year as it shrinks its international fleet size on the back of a decision to exit certain routes – including Auckland to London – and focus on the Asia Pacific and US market.

Air New Zealand carried 10.35 million passengers in the eight months through February 2023, more than double the 4.3 million carried in the same period a year earlier.

The airline’s ASX-listed securities last traded at 72.5c each — down sharply from a pre-Covid peak of $1.80 on January 17, 2020, but well above their 49c price in June last year.