Air New Zealand Limited

Welcome to AIR New Zealand 2025 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. You may begin.

Kia ora and good morning everyone. Today's call has been recorded and will be accessible for future playback on our Investor Centre website. which you can find at www.earnewzealand.co.nz forward slash investor centre. Also on the website, you can find our annual results presentation, annual report and media release, as well as other relevant disclosures. 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 that you read through the disclaimer, and in particular, the forward-looking cautionary statement provided on slide two of the presentation. Joining me on the call today are Chief Executive Officer Greg Foran and Chief Financial Officer Richard Thompson. We'll also be joined by Layla Peters, our GM of Corp Finance, for the Q&A session at the end. The structure for today is straightforward. Greg will kick things off with some reflections on the 2025 financial year and what we're seeing as we look ahead. Richard will then step through the financial results. This year, we have also included a section on the longer-term strategic outlook in our PAC, which includes our current assumptions around fleet availability and our return to scale. With that, I will pass the call over to Greg.

Thank you, Kim. Kia ora and good morning, everyone, and thanks for joining us on today's call. Before we get into the detail of the result, I want to provide a bit of context on the 2025 financial year. where we've made progress, where it's been tougher, and what we see coming next. From the outset, we knew 2025 would be hard, and it has been. But we got on with it. We've made real progress in the areas we can control. The transformation program we laid out in Invest Today last November delivered around $100 million in incremental EBITDA benefits this year, which I'll come back to shortly. We remain on track for our FY28 targets. At the same time, we've continued to lift capability in the background, improving the customer experience, strengthening our digital infrastructure, and building more resilience into the operation. We've armed our people with better tools, and that's starting to show up in how we perform. But to be frank, operating a network with up to 11 of your most efficient aircraft out of action at times has been a bit like playing a rugby game without half of your forward pack. We operated 4% less capacity than the prior year and the knock-on effects of this lack of scale have been felt right across the network. We continue to work closely with Rolls-Royce and Pratt & Whitney. Compensation is a big part of those compensations, but getting a clear picture on when the engines return to service is just as important. That visibility is what allows us to plan properly. We expect pressure on capacity to start easing later in FY26 as the first of our new 787s arrive and as more retrofitted aircraft return to service. But we still have to be patient. Richard will take you through the capacity outlook in a moment, but the short version is this. Low single-digit growth in FY26, followed by a more meaningful step up in FY27 and FY28 as the engine constraints ease. So yes, it's been a tough year, but we've kept moving. We've delivered in the areas that matter, and we're positioning ourselves well for what's next. The numbers on this slide speak for themselves, so I won't linger too long, but a few points are worth calling out. First, I want to thank our team. What they've achieved this year in the face of persistent disruption is nothing short of outstanding. It's a testament to the strength of our culture. Secondly, it's worth noting that in a year where commercial aviation saw some tragic events globally, we were recognised as the world's safest airline. That's not a title we take lightly, and it reflects the safety-first mindset and discipline that underpins everything we do. We ended the year with earnings before taxation of $189 million. Net profit after tax was $126 million. That was delivered against some real constraints, not just on the fleet side, but with softer domestic demand and elevated cost pressure across the aviation system. It's also, as I said earlier, the first year where we've felt the full impact of engine availability issues over a 12-month period. With the network shrinking 4%, this obviously impacts both the top line and our productivity. Demand in the corporate and government sectors was also about the softest we have seen. So to land at the top end of guidance in that context is no small achievement. I want to briefly acknowledge our loyalty program as well. Airpoints passed 5 million members this year and we saw continued strength and engagement and redemption activity. It's a great signal of customer affinity and an important platform for future growth. Looking across our network, international demand has held up well, but locally the market is still doing it pretty tough. If we look at the domestic market first, demand remains soft overall, particularly out of Wellington, where we continue to see weakness in government travel, and we expect this trend will continue for some time yet. That said, we are seeing some positive signals in pockets of demand Our New Year sale also generated some good momentum across shoulder periods, so we'll keep stimulating the market where we can. On the Tasman, demand continues to be strong. We're adding capacity to existing routes and are looking forward to launching Christchurch Adelaide in October, a great example of how we're expanding international services from the South Island. Asia continues to perform well. Outbound demand has remained steady, likely supported by lower on-the-ground travel costs in key destinations. Inbound North America also remains strong, helped by the strength of the US dollar. We are, however, seeing signs of a shorter booking curve in that market, something other northern hemisphere carriers have also noted. We're keeping a close eye on that as we head into our peak summer period. We're pleased to see that the premium cabin demand is still outpacing economy. We expect this trend to accelerate further as more of our retrofitted Dreamliners return to service and our new premium-rich aircraft start to arrive later this financial year. While a fair bit of our focus this year has been on managing disruption, we've also made progress in the areas that matter most to customers, and we're starting to see the results of that come through. We've made meaningful gains in operational resilience and digital tools, particularly in how we recover from disruption. That matters because with 11 aircraft out at times and a number of weather events this year, recovery becomes the name of the game. Our on-time performance improved significantly in the second half of the year, up six percentage points, and that's a result of decisions we made to put some buffer into the schedule and more effective disrupt handling. You can see that flow through into customer sentiment, with net promoter and in-flight experience scores stronger in the back half of the year. On the commercial side, our next generation revenue management tools are giving us sharper insights and are helping us to optimise both yield and load, which is especially important in a constrained environment. And on the digital side, we rolled out live chat, automated rebooking functionality, and other customer self-service tools, all of which have substantially reduced manual interventions, particularly at key pressure points like the contact center and airports. We also equipped 3,000 of our people with AI tooling this year, which will help our teams problem-solve faster and lift productivity without adding much in the way of cost. There's more to do, but the momentum is encouraging, and it reflects a team that's continuing to deliver, even when conditions are tough. Turning to our transformation initiatives, many of you will recall this was a key focus area we laid out in Invest Today. These initiatives have delivered $100 million in EBITDA benefits for the year, in line with our expectations. The mix, however, has shifted slightly from what we expected. with stronger than anticipated performance in ancillary revenue driven by uptake in our seats to suit products and demand in the premium cabins. Some of our cost-focused initiatives, which made up about one-third of the improvements, were impacted by operational constraints, especially in areas where fleet disruption limited our ability to drive efficiency gains, for example, in productivity and labour deployment. What's important is this. Kiamo is working. It's helping to partially offset inflation, but more importantly, it's positioning us for incremental earnings growth as the network scale returns. This slide gives you a sense of how we've navigated the year and what remains a highly constrained fleet environment. The second half was particularly challenging. At points, we had up to six widebodies and five narrowbodies grounded, which is roughly 20% of our jet fleet. Despite that, we kept flying. The arrival of two new A321neos recently has been a valuable flex option across both domestic and short-haul international. We also secured additional short-term lease engines, which will help support some targeted growth in the domestic network. Importantly, we also baked more resilience into the schedule, which helped protect reliability, particularly in the back half. Looking ahead, we don't expect a big step change in availability in the first half of FY26, but pressure should start to ease from the second half as the first of our new 787s arrive and we reach critical mass on retrofits returning to service. So yes, it's been a challenging year on the fleet front, but we've stayed on the front foot, kept customers moving and made smart decisions in a tough environment. As more aircraft come back online, we'll start to unlock more scale, and that's important. With that, I will hand over to Richard to discuss the financials.