Greg Foran, CEO, Air New Zealand, says a simple plan executed perfectly is the key to success. Interview by Graham Newton.
Are you positive about the airline’s performance in 2023?
We have easily outstripped our forecast of a year ago. In fact, we were a long way out with how we thought the recovery would go—but on the positive side. New Zealand opened earlier than we thought and the number of people traveling, both domestically and internationally, was considerably more than we anticipated.
The period from July to December 2022 was very satisfying and January 2023 is encouraging for the year ahead.
But I do wish we had more pilots, engineers, cabin crew, and ground staff. We are having to moderate what we are putting into the market and we’re not flying as much as we want to or as we could.
Are you worried about a skills shortage in aviation and, if so, how can the problem be tackled?
There is a shortage of labor in New Zealand. It’s not just aviation but also bus drivers, ferry workers, and more. A lot of workers simply haven’t returned to work after the pandemic.
Air New Zealand has managed to bring back 3,000 people, but the reality is that we are at 90% of the headcount we need. And that means we can’t optimize our operations as we want because we are stretching everything.
I do think that staff shortages will limit capacity in the near term for a lot of airlines. And getting capacity back longer term means looking at new ways to operate.
Did the country’s long lockdown give you an opportunity to review strategy?
You never waste a crisis. We took the decision to retire our Boeing 777-200s fleet. We also got ahead with 14 Boeing 787s retrofits, including seats and galleys and firmed up deliveries of some new 787s. The first will arrive in 2024 and will have a completely new product on board. We also continued with our Airbus A321-neo and ATR-600 orders. Both these aircraft are used domestically.
But most importantly, we have made the business agile. We have created tribes and squads and don’t have the traditional functional blocks. We restructured the business around where the value is.
So, yes, the downtime enabled us to be extremely focused. The plan is simple. It is to grow our domestic operations, optimise our international flights, and lift our loyalty business.
Everything we do fits into that plan. Now, it just about executing all the elements logically and sequentially.
What are your views on the 2050 net zero target and where are the challenges in carbon reduction?
The aviation eco-system has to buy in to the target. It can’t be left to airlines alone. There must be partnership across the board.
Another challenge is that it will be easy to get distracted. There could be another pandemic, the cost of living is rising, and the geopolitical situation is tense. It is going to require bold decisions by governments to incentivize sustainable initiatives that enable aviation to achieve goals that are absolutely necessary for its continued growth.
Some governments are making those decisions. The United States, for example, has been forthright in its approach. But other countries, especially in this region, are still determining where sustainability sits on the list of priorities.
Aviation needs governments to step up. Now is the time to be a leader.
Can you secure sufficient supplies of sustainable aviation fuel (SAF) without local production?
SAF are such a large part of the 2050 goal. They are crucial to Air New Zealand because we fly international long-haul. Most emissions come from international flights and there won’t be a viable, alternative source of power for these flights.
There is no local production in New Zealand, but we are helping with a study to see if we can produce SAF here. It is likely we could use a woody biomass, but the study is yet be completed.
The point is that the government—and we are in an election year—must support the study’s conclusions. We not only need more SAF but also need it to be affordable. SAF is 3–5 times more expensive than kerosene. You can’t take 20%–30% of your cost base, increase it 3–5 times and think you can still be competitive or even viable.
Air New Zealand is renowned for its innovation. What new ideas are in the pipeline?
There have been more issues with mishandled bags since the pandemic than we have seen for a long time. But our aim is to handle ten times as many bags with half as many people thanks to new apps and processes around baggage handling. It is a better solution for the customer because they will know exactly where their bag is, a better solution for our staff as it will make the job more interesting, and a better solution for the airline because it will cut costs.
We are also exploring a digital bag tag. That will make the check-in process as simple as putting your bag on a conveyor belt. It’s like an Amazon checkout-less store where you just put your goods in your bag and go. The app will have all your details, detect where your bag is and send the information. It doesn’t need a major change to infrastructure and will be great customer service.
How important is your digital transformation?
We are rethinking everything to be a digital airline. Even during the pandemic, we certainly haven’t held back on updating our product and our digital transformation. We are putting all our data in the cloud, there is a new flight planning system, and planning new retail and cargo systems too.
We are also working on a new loyalty platform, which is about two-thirds finished.
Looking at your region, are you confident that the recovery will be robust?
It is always best to be cautious about forecasting because so many of the forecasts that we have done recently have been wrong. The pandemic was longer than we initially expected, the recovery—when it happened—was faster.
Everyone in the region is bringing back capacity as fast as their situation allows. So, I expect 2023 to be a busy year bit also a competitve one. The Chinese carriers will be back, for example. But, of course, China still has testing requirements and we don’t know how long that will last.
Is there any issue in aviation that you feel is not given the prominence it deserves or that particularly interests you?
We have been looking closely at new aircraft designs and propulsion methods whether that is hydrogen or a hybrid engine using electric.
We have identified four leaders in this field and the idea is to work on a commercial project with a demonstrator that could be launched as early as 2026. We’re talking about a nine-seater aircraft.
It suits our airline because we want to be a leader in this field and these aircraft types suit our geography because most flights are under an hour.
Looking ahead, what are your hopes for Air New Zealand and the industry?
We want to be a world-leading digital airline, lead on sustainability, and develop our people and culture.
Digitally, we are moving data into the cloud, introducing new systems, and rebuilding apps. But we will also take the idea further and ensure we integrate the customer experience into everything we do. We won’t be there in the next couple of years, but we’re already making really good progress.
In terms of sustainability, we will be doing everything we can to make sure we achieve carbon neutrality as quickly as possible and then start to go beyond that.
It is also important to build on our culture. That is so important to Air New Zealand and its people. Enhancements in this area includes everything from new uniforms to new customer services.
Really, we are obsessed with being brilliant at basics. We want aircraft to leave when they are meant to leave, arrive when they are meant to arrive, and we don’t want to lose anything in between. If we execute that correctly, everything else will follow.