Global recession fears cloud Air New Zealand’s recovery

Air New Zealand’s chairman has warned a global recession could derail the airline’s recovery plans.

Air New Zealand CEO Greg Foran. Picture: Getty Images

Air New Zealand has raised the spectre of a global recession as one of several potential threats to the airline’s recovery.

At the airline’s annual shareholder meeting, chairman Dame Therese Walsh stressed the uncertainty that had dogged the travel industry in recent years was not over yet.

“We are closely monitoring consumer behaviour given cost of living and inflationary pressures and the risk of a global recession, all of which have the potential to slow our recovery,” Dame Therese said.

For the 2022 financial year, Air New Zealand reported a “better than expected” loss of NZ$810m ($723m), almost double the previous year’s NZ$415m loss.

Since New Zealand’s borders fully reopened just eight weeks ago, Dame Therese said demand for travel was strong, with domestic bookings at 105 per cent of pre-Covid levels.

Despite a high level of liquidity with $NZ2bn in cash and a $NZ400m standby loan facility, she said the board believed it prudent to maintain an elevated balance in the current environment.

Half-year earnings were expected to be in the range of $NZ200m and $NZ275m but no full-year guidance was offered in account of “global recessionary risks and other macroeconomic factors”.

“The airline strongly cautions against extrapolating first half earnings for 2023 to the full year given the many uncertainties that exist,” Dame Therese said.

All resolutions put to shareholders were passed, including the re-election of Dame Therese and director Jonathan Moran.

As chair of the remuneration committee, Mr Moran noted no long-term incentives were paid to executives for the 2022 financial year because of the weakness of Air New Zealand’s share price. At 65c, the shares remained a long way short of their pre-pandemic price of around $1.80.

CEO Greg Foran’s base salary returned to $NZ1.6m after he took a $250,000 pay cut during the pandemic. With the addition of short-term incentive bonuses, his total package amounted to NZ$2.3m ($2.02m) just below that of Qantas CEO Alan Joyce, who earned $2.3m in the last year.

Although there were few questions about Air New Zealand’s financial report, shareholders were keen to hear if the airline was planning to reinstate flights to the UK, or operate new routes to India.

“There are no current plans to fly to India or fly outside the international ports we currently fly to,” Dame Therese replied.

“We are constantly reviewing where we are (with the international network) and we will keep things under review.”

Mr Foran pointed out the airline had just completed the biggest recruitment drive in its 82-year history, hiring 1500 people over three months.

He said as well as perfecting the airline’s operational performance, he wanted to elevate their “airpoints” loyalty program to one that “excited customers”.

“Loyalty is a source of untapped potential for new revenue and a superb channel to deliver on our promise of differentiation,” Mr Foran said.

“There’s a transparency in the program in terms of there’s no adjustments in what the points are worth. One point is always worth a dollar.”