Virgin exit ‘overplayed’, says Air NZ chief Christopher Luxon

Air New Zealand’s chief says reports of a coup to oust John Borghetti from Virgin have been exaggerated.

Air New Zealand Ceo Christopher Luxon (right) Picture: Brendon O'Hagan /Bloomberg News.

Air New Zealand chief Christopher Luxon says the circumstances around his sudden departure from the board of Virgin Australia have been “chronically overplayed” and that the Kiwi carrier’s exit was purely a commercial decision.

In his first comments discussing his dramatic exit from Virgin Australia’s board in March, Mr Luxon said there was no “bad blood” between him and Virgin chief John Borghetti, that their relationship remained “good” and they spoke regularly.

It had been widely reported that Mr Luxon quit the Virgin board after an unsuccessful coup to oust Mr Borghetti. But Mr Luxon said such reports were exaggerated.

“The dynamic has been a bit over played. We know you Australians like your TV and political soap operas but I’m not getting into that. It’s chronically overplayed,” he told The Australian.

“Virgin needed more capital going forward and we felt that the investment was too big for us. It was the right time to come out and to pass off to other shareholders who can support the business better going forward. That’s really what drove that decision.”

Mr Luxon’s comments came as Air New Zealand today posted its best financial result in its 76-year history as low oil prices, cost cutting and better fleet management pushed the company to a net profit after tax of $NZ463 million.

Underlying earnings jumped 70 per cent to $NZ806m but losses incurred from the sale of its Virgin stake and a $NZ57m settlement over its involvement in cartel behaviour dragged its before-tax profit to $NZ663m.

The result was the fifth straight year of earnings growth for the airline but that run is to come to an end next year, with Air New Zealand forecasting a 50 per cent drop in earnings to between $NZ400m to $NZ600m.

“2016 was a pretty extraordinary year and so 2017 is really an adjustment to more normal trading conditions for us. We have two big headwinds to overcome. In this result is $112m worth of fuel hedging foreign exchange benefit but that won’t repeat in the coming years. And the second big issue is the increasing levels of competition coming into the marketplace,” Mr Luxon said.

“That is not a bad thing, we think that speaks strongly of the tourism proposition here in New Zealand. We obviously have a very strong domestic position in New Zealand so can move those visitors around, but it will be a year of adjustment as we make sure supply and demand get equalised over time.”

The airline’s bumper profit result prompted its board to declare a 20 cent dividend for the full-year, and a 25c special dividend thanks in part to its sale of Virgin.

Employees will also benefit from the record performance, with a bonus of up to $NZ2,500 to be paid to 8,200 unionised staff not covered by other incentive programs.