Air New Zealand Limited

Welcome to a New Zealand 2024 annual results call. During the presentation, your phone lines will be placed on listen only until the question and answer session. Please refrain from asking questions until that time. And with that, I will turn the call over to Air New Zealand's Head of Investor Relations, Kim Coutts. Please go ahead.

Thank you and good morning, everyone. Today's call is being recorded and will be accessible for future playback on our Investor Centre website, which you can find at www.airnewzealand.co.nz forward slash Investor Centre. Also on the website, you can find our annual results presentation, the annual report and media release, as well as other relevant disclosures. This year, our annual report includes our sustainability report and our first climate statement, which has been released as a separate online document. We encourage investors to review these materials as well. Speaking on the call today will be Chief Executive Officer Greg Foran and Chief Financial Officer Richard Thomson. Leila Peters, our GM of Corporate Finance, will also join us for the Q&A session. I would like to take a moment to remind you that our comments today will include certain forward-looking statements regarding our future expectations, which may differ from actual results. We ask you read through the disclaimer, and in particular, the forward-looking cautionary statement provided on slide two of the presentation. I will now hand the call over to Greg.

Thank you, Kim. Kia ora, and good morning, everyone, and thanks for joining us on today's call. If I were to characterize the 2024 financial year, it would be a year that was both satisfying and rewarding, but also challenging and frustrating, often all in the same week. Our team's energy and drive to deliver for our customers shone through. We transported more than 16 million passengers on our network, 4% more than last year, despite significant aircraft constraints. We delivered improved on-time performance, up almost three percentage points, even though we operated 17% more capacity this year. Work to improve customer pain points continued. We rolled out new features on our digital app, including baggage tracing and various self-service enhancements, which give our customers more capability to self-serve and helps us manage disrupts more efficiently. We also recently introduced our live chat function, enabling customers to resolve queries real time, which has been hugely popular. Non-voice channels now represent just over 30% of our customer interactions. We reinvigorated our Seats to Suit product on the Australia and Pacific Islands network, giving customers greater flexibility and value, with early feedback showing strong commercial take-up and customer feedback. As a result of these and many other small but meaningful improvements to our onboard offerings and pre-flight procedures, we saw customer satisfaction levels improve to pre-COVID levels, This is significant given the level of unavoidable schedule disruptions we've had to make across the year due to aircraft availability constraints. Now you'll hear me say this often, but our exceptional team of Air New Zealanders are the secret to our success. And we were pleased once again to be awarded New Zealand's most attractive employer. It's more important than ever that we have a strong team focused on doing the right thing for our customers. Despite all of these examples, which I would firmly put in the satisfying and rewarding category, we also faced a heck of a lot of challenges. The financial result we released to the market earlier today with earnings before taxation of $222 million and net profit after taxation of $146 million was in line with the guidance we provided in April. But it was a fair way off the levels we experienced in 2023 when pent-up demand and constrained capacity across the industry led to one of the strongest financial results in our history. And while we reported a solid first half of the 2024 financial year, the second half has proven increasingly challenging as the impact of both operating and economic headwinds became more pronounced. By far the most impactful of these headwinds has been the unfortunate trifecta of challenges we currently face with aircraft availability across two of our major fleets. the A321neos and our Boeing 787 Dreamliners. I'll touch on that more in a moment. But what I did want to highlight here is that while these issues are temporary, we estimate our 2024 earnings would have been around $100 million higher net of compensation if we'd been able to operate our aircraft and network schedule as intended. This is not an insignificant amount and really only captures directly attributable costs. not the resulting operational inefficiencies and productivity losses. Richard will provide further detail on this shortly. Our balance sheet remains strong with the capacity to manage these temporary challenges, and the Board was pleased to announce that shareholders will receive an unimputed final ordinary dividend of 1.5 cents per share. This takes total ordinary dividends for the year to 3.5 cents per share. The board continues to monitor opportunities for future returns to shareholders, taking into account the challenges we currently face, as well as the airline's future capital commitments. Although there are considerable distractions in the current environment, we are facing our challenges head on. I won't go into each point in detail, but I'm happy to take questions later. What I do want to focus on here is the huge amount of work that we've undertaken to mitigate some of the headwinds we have faced. As noted earlier, the additional maintenance requirements for both the Pratt & Whitney and Rolls-Royce engines that power our A321neos and Dreamliners has been the single most impactful operational challenge this year. This has been further exacerbated by ongoing supply chain and labour constraints across the entire aviation ecosystem. What this issue means practically for us is that up to six of our newest and most efficient neo aircraft have been out of service at times, and we expect this to persist to some extent across the next 12 to 24 months. Reduced levels of Rolls-Royce Trent 1000 engine spares in the market have also meant that up to three of our Dreamliners are on the ground at times. Having close to one billion of our most efficient assets on the ground is suboptimal, to say the least, resulting in disruption and complexity, not only for our customers, but also for our staff who've had to contend with constant adjustments to the schedule, reworking of rosters, swapping out of engines, sourcing spares, and countless other tasks needed to ensure we can get our customers to and from their destination. We took immediate action to minimize the disruption, leasing three Boeing 777-300s and securing additional engine spares. No easy task in a market where many other airlines globally are also searching for spares. We're also holding extra inventory across the board for spares like seat parts to ensure supply delays don't further tie up our fleet. You also saw us make some really difficult decisions, such as the temporary suspension of our direct route to Chicago to make sure we could deliver a schedule that was more reliable overall for our customers. Moving on to the economic slowdown in New Zealand, Across the second half, the revenue environment tightened further as the weaker New Zealand economy started to noticeably impact demand. At the same time, reduced business travel spending by both corporate and government customers on our domestic network compounded pressure on yields. We responded quickly, making targeted schedule reductions, reviewing our revenue management settings, and focusing on improved ancillary revenue offerings and conversion rates. Leisure demand which is only down slightly compared to the prior year, has responded well to sales activity and marketing campaigns, and our SME segment is holding up well. We've also seen a continuation of the competitive dynamics we highlighted at the interim results on our international network, with overall market capacity up almost 50% across the year on the North American routes we serve. Our strategy for international markets remains clear. We will prioritise our premium cabins, and you'll see this as we start our retrofit programme later this year, with the introduction of innovative new products such as BP Lux. As our new 787s start arriving from Boeing in 2026, you'll also see our long-awaited Skynest product being released to the market. We will continue to build marketing programmes that inspire travel to and from New Zealand on Air New Zealand, and you can expect to see a significant marketing activity over the next 12 months. We're committed to operating in markets where we have confidence in our right to win and where the route is strategically important to our customers. The last point we have up on the slide is inflation on the cost base, which Richard is going to speak to more fulsomely in a moment. Despite the external dynamics at play this year, Our key and most strategy continues to provide a roadmap for our business. It allows us to look beyond these temporary headwinds and ensure we are acting deliberately to step change our customer proposition and deliver sustainably stronger financial performance over the medium to long term. We've made demonstrable progress against this roadmap and are excited about the momentum building in a number of areas. I'll touch on just a few highlights from the last year. Looking at our three key profit drivers Our efforts to grow domestic are currently somewhat challenged with the NEO issues, but we have enhanced and added more self-service offerings via our app, invested in new and efficient hybrid electric ground service equipment to support our operational reliability, and we're trialing a Starlink-powered Wi-Fi solution on domestic aircraft. All of these investments will really put us at the top of our game when we see our NEO fleet scale back up and return properly to the domestic network. Progress against our Elevate international pillar has spanned across all areas of the customer experience. We recently launched our reinvigorated seats to suit offering in June, which has seen a very good uptake with customers. Responding to significant demand, we're now offering Bali services year round. We also finished our redesigned premium check-in area at Auckland Airport and had our revenue alliance partnership with Singapore Airlines reauthorized for another five years. As we look to lift the value of our loyalty to our members in our airline, it's been a big year. After many months of hard work across the business, we have successfully launched our AirPoints program in the iFly loyalty platform a few weeks ago. iFly lays the foundation for an improved member experience, making it easier to access and view AirPoints activity and benefits, as well as streamlining the process to expand and onboard new ground-earned partners. This is a key step on our journey to create a more rewarding experience for our customers today and in the future. We expect to have more developments to share as the 2025 financial year progresses. I won't go into details across each of our key enablers, but this year has been significant in terms of the level of new and enhanced data and digital tooling that we have put into the hands of our people, both on the front lines and across the operation. Better data at their fingertips, providing real-time information and feedback, help our people get continuously better at delivering a world-class operational performance and service for our customers. I will now pass over to Richard, who will provide more detail on the financial result.