AIR - Air NZ.

[Ecks]

Interesting anecdote about the old days of flying and the cost. When AIR turned 75 years old on 30 April 2015 I was in Wellington to attend the Summerset annual meeting so stopped by at Te Papa afterwards to visit AIR's excellent exhibition commemorating their anniversary. Firstly the interior of the old flying boats was vastly more spacious than you would expect and standard economy seats put the new business class seats of the Dreamliners on display to shame.

The interesting parts was the warm jackets and scarf's you had to wear to withstand the cold at altitude but most interesting was the cost. It took half a years average income to afford the 9 hour one way journey to Sydney. In today's dollars that would be something like $25,000 one way.

What I find most curious about the airline industry that gives a valuable insight into the pervasive culture of growth and expansion and ego driving it, is that as soon as some new technology or fuel efficiency measure comes available, airlines pass all the savings on to customers in their ravenous attempt to grow. Prices like $1,599 return to Europe on a quality carrier really are absurdly cheap.

Will this sort of pricing ultimatly be a thing of the past ? I doubt it. In time the same grow at all costs that seems to be all pervasive and endemic within the ego's of airline CEO's worldwide will raise its ugly head again. It seems the industry itself is systemically flawed so in terms of ever expecting long run return on equity commensurate with the risks involved, the sector is forever destined to be an underperformer. No doubt Warren Buffet is coming to the same conclusion after his very costly exercise in irrational exuberance.

As always, brilliantly put Beagle!
Airlines seemingly to do everything EXCEPT to put their own company first. They service first and foremost the government, held to account over extreme costly regulation and secondly service the customer. Perhaps a more monopolised airline could see more of a return to putting the airline first with higher prices rather than the competitive driven pre-covid bums on seats policies that was seemingly at all cost. State Owned 100% is the only way AIR will function to the same profitability and stability as the likes of Qatar and Emirates, I can assure you that their rates are the highest in the industry, our Export freight rates are 3x more expensive should we opt to complete loadouts with them compared to AIR.

[mcdongle]

As always, brilliantly put Beagle!
Airlines seemingly to do everything EXCEPT to put their own company first. They service first and foremost the government, held to account over extreme costly regulation and secondly service the customer. Perhaps a more monopolised airline could see more of a return to putting the airline first with higher prices rather than the competitive driven pre-covid bums on seats policies that was seemingly at all cost. State Owned 100% is the only way AIR will function to the same profitability and stability as the likes of Qatar and Emirates, I can assure you that their rates are the highest in the industry, our Export freight rates are 3x more expensive should we opt to complete loadouts with them compared to AIR.

Qatar and Emirates not doing that well....

https://www.reuters.com/article/us-q...-idUSKBN1W31MK


https://www.ft.com/content/f99315ac-...c-6eeb837566c5.....

These are last years results

[IAK]

Coronavirus: Air New Zealand begins pilot redundancies. Poor blighters, just the start I'm afraid.

https://www.stuff.co.nz/business/ind...t-redundancies

[samjaynz]

Coronavirus: Air New Zealand begins pilot redundancies. Poor blighters, just the start I'm afraid.

https://www.stuff.co.nz/business/ind...t-redundancies

Very rough. Two friends of mine had recently (within last 6 months) joined Air NZ as 'entry' pilots - they will probably be looking down the barrel of huge student loans and no income ... what do you go and do with your pilot qualification?

[blackcap]

Very rough. Two friends of mine had recently (within last 6 months) joined Air NZ as 'entry' pilots - they will probably be looking down the barrel of huge student loans and no income ... what do you go and do with your pilot qualification?

I hear supermarkets are looking for shelf stackers. But all joking aside, I was talking to my partner, who is quite active in the aviation space, about this very issue this morning. A lot of those pilots have very specific qualifications and with the global demand for pilots currently plummeting, its going to be a tough gig for some for quite a while. That is the bit that worries me about the economy going forward. If unemployment gets to over 10% for a sustained period of time it could get quite bleak.

[steveb]

with cheap fuel,airplanes and landing fees,there should be a few cheap startups coming along,pilots who have been let go should be able to get something but at what sort of salary who knows.Perhaps the more junior pilots will find slots as they won't be looking for as much as the more senior pilots were paid

[stoploss]

Very rough. Two friends of mine had recently (within last 6 months) joined Air NZ as 'entry' pilots - they will probably be looking down the barrel of huge student loans and no income ... what do you go and do with your pilot qualification?

Student loan only comes out as a % , and if you are not working or below the threshold nothing is payable .
I think if they are motivated to be a pilot they will find plenty of work , just have to knuckle down and accept the new normal.

https://www.dailymail.co.uk/news/art...ry-driver.html

[iceman]

I hear supermarkets are looking for shelf stackers. But all joking aside, I was talking to my partner, who is quite active in the aviation space, about this very issue this morning. A lot of those pilots have very specific qualifications and with the global demand for pilots currently plummeting, its going to be a tough gig for some for quite a while. That is the bit that worries me about the economy going forward. If unemployment gets to over 10% for a sustained period of time it could get quite bleak.

Yes indeed I think the situation will be quite bleak, particularly for them guys in the middle I reckon. The older guys will many be ok with an early retirement or lower paying jobs in different industries and the younger guys will have no option than to retrain for something else or work at lower salaries for new cheaper startups. Sadly with this industry and many others badly affected from this, there will be some very serious mental health problems to deal with. Very sad.

[Beagle]

https://www.nzherald.co.nz/business/...ectid=12322688
Seems like a very low number considering their business has shrunk by 95%+ and isn't going back to anything remotely like normal anytime soon.
Thin end of the wedge or AIR nor really facing up to the reality of the situation ? You be the judge.

The opportunity here is for a full reset of the cost structure of the airline and looks like its being squandered. Hordes of staff on $300K plus...

[Chinesekiwi]

Under the Open Skies agreement in place I do believe Air NZ has the ability operate domestically within Australia however our 'friends' across the ditch have made it a very financially unattractive proposition to do so.

The Pilot redundancies are the first cut only and that has been publicly flagged.

They remain committed to 30% staff reduction (despite the govt. subsidy) and will act on these numbers this week and next.

Here's what is odd. 70% of those who applied for voluntary exit have been approved ergo 30% have been declined. The vast majority of those declined were for financial reasons, the cost is seen as too high.

So cheaper costed staff get approved and expensive do not. Net result is that if these 30% survive redundancy (and a lot will due to superior/older contracts) their 'ongoing cost' to the business will be far in excess of new reset employees and they will stay for many years to come.

I don't think Air NZ is necessarily worse off for not following say QANTAS's LWOP of it's workforce (it cant follow OZ companies anyway as Oz law permits forced LWOP and NZ law does not).

Once QANTAS resume they will have the same extremely expensive workforce to contend with cost wise. Air NZ will be a lot slimmer and with renewed cost structures I would imagine.

Foran has made a point as Beagle has alluded to that yes once the crisis ends and some form of normality resumes the new normal globally may very well be new low cost operators who get aircraft and crew for dirt cheap and off they go.

Would Air NZ consider approaching the govt. to clip the Open Skies policy to prevent or minimise this to the benefit of Air NZ as per most other countries?

Foran won't be drawn on this but he flashes his pro competition credentials when he muses more that if they get the company in the 'right shape' sooner and the market recovers enough then maybe they will get first mover advantage in markets where incumbents are wounded and slow to respond.