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Air New Zealand. CLSA Investors’ Forum 15 May 2001. Agenda. Overview Introduction to Air New Zealand Key Markets Fleet Capital Management Strategy. Strategy Networks Marketing. Sales & Distribution. Operations. Customer Services. Freedom. Kendall. Mt Cook. Nelson. Skywest. - PowerPoint PPT Presentation
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Air New Zealand
CLSA Investors’ Forum
15 May 2001
2
Agenda
Overview
Introduction to Air New Zealand
Key Markets
Fleet
Capital Management
Strategy
3
Alliance Partners
Operations Customer Services.
Strategy Networks Marketing
NZ NationalAN Australia
Nelson
Eagle
Mt CookSkywestAeropel.Kendall
Freedom
AN International
NZ International
ANZESVentures
Terminal Services
TravelandJetset
Mt Cook Ski-fields
Corporate Units
Cargo
Hazelton
Sales & Distribution
Introduction to Air New Zealand
World top 20 scale
Most comprehensive network across Australia, NZ and South Pacific
First to operate in all sectors of the Australasian aviation market
Offering world’s widest range of destinations, flight options, loyalty rewards – via SIA and Star
Two powerful brands in our home markets
Home market leader in e-travel services
4
Challenging Market Conditions
Australian New entrants: Share and Yield DeclineAnsett capacity share dropped from 46.2% to 42.5% Ansett average domestic yield has fallen significantly
1.3 1.4 1.3 1.21.7 2.2
0
1
2
3
4
5
FY96 FY97 FY98 FY99 FY00 Dec 00
Average Fuel Cost(NZ ¢/ASK)
Falling NZ$
0.86 0.88 0.89 0.87 0.84 0.80 0.77
0.64 0.67 0.690.59 0.53 0.5 0.42
0.00
0.30
0.60
0.90
1.20
1.50
1995 1996 1997 1998 1999 2000 2001
NZD : AUDNZD : USD
5
New Zealand Domestic Market
Historically strong position in the NZ market
The NZ Domestic Airline provides strong contribution to Group earnings
Qantas NZ franchise closed in April 2001
Air New Zealand moved by expanding “Freedom Air” into the domestic market
Other regional airlines have declared intentions to operate within NZ
90%
10%
20%
30%
40%
50%
60%
70%
80%
Fe
b-9
8
Ma
y-9
8
Aug
-98
Nov
-98
Fe
b-9
9
Ma
y-9
9
Aug
-99
Nov
-99
Fe
b-0
0
Ma
y-0
0
Aug
-00
Nov
-00
Market Share to Dec 2000
NZ QF NZ
6
Australian Domestic Market
Need To Reverse Ansett’sDomestic Capacity Disadvantage
Need To Reverse Ansett’sDomestic Capacity Disadvantage
Capacity Share Beyond The TippingPoint Can Deliver Exponential Market Share
Capacity Share Beyond The TippingPoint Can Deliver Exponential Market Share
Market Share Versus Capacity Share(Australian Domestic Market)
40%
42%
44%
46%
48%
50%
52%
54%
56%
58%
Jul 9
4
Nov
94
Mar
95
Jul 9
5
Nov
95
Mar
96
Jul 9
6
Nov
96
Mar
97
Mar
00
Jul 0
0
Jul 9
7
Nov
97
Mar
98
Jul 9
8
Nov
98
Mar
99
Jul 9
9
Nov
99
AN RPK
AN ASK
QF ASK
QF RPK
The Tipping Point
Capacity Share
7
Australian Domestic Market: Strategy Change Lack of investment in fleet capacity New aircraft
Grow at least at market rate
Low investment in product Advertising Airline relaunch Product refresh
Tight schedules affecting reliability Detailed punctuality study Build flexibility into schedules
Phased Maintenance Block maintenance 7 day operation Maintenance planning well within tolerance
Direct Sales Price setter Recapture lost share of agent and
corporate markets Improve overall offering
8
Australian Domestic Market: 767-200 Grounding
91% of all passengers booked were flown by Ansett or Air New
Zealand aircraft.
Galvanised workforce
Improved on-time performance
Consumer intention to fly Ansett has improved
Limited impact on forward bookings
B767 operating fleet cleared - “fit to fly”
NZ$20m advertising campaign launched
Cost of grounding estimated to be NZ$8m
9
Fleet DevelopmentOverall Fleet & Network plan currently under review
Initial changes to fleet structure underway–Ansett additional capacity (4 x 767-300)–767-200 sale and lease back agreement and subsequent replacement
Particular attention on Ansett fleet given lack of recent investment
Reduce aircraft types and manufacturers–maintenance & training synergies
Full purchase and funding decisions expected by December
10
Capital Management
Limted balance sheet capacity–Gearing as at December 2000 = 76.5%
A/B share structure restricts ability to raise equity
All funding options being reviewed–Equity–Operating leases–Secured aircraft financing–sale/leaseback of other assets
Funding plan to be finalised as part of the strategic review
11
Growth OptionsCapitalise on strength of brands in home markets
–Expansion of Ansett International–Regaining market share in Ansett Domestic–Growing New Zealand market via Freedom Air–Product investment
Futher growth and integration of Engineering businesses–ANNZES–Christchurch Engine Centre
Other Initiatives–Relaunch of brand–Frequent Flyer Program relaunch–Additional improvements to customer offerings
12
Key Strategic Milestones
Additional 767 capacity in Australia from July 2001
Strategic Review completed by the end of the year including:– Network initiatives – Funding plan– Fleet requirements
Aircraft orders placed shortly afterward
Airline relaunch early 2002
Air New Zealand
CLSA Investors’ Forum
15 May 2001
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