Air New Zealand (ASX:AIZ)

Christopher Luxon
Market Cap (AUD): 3.22B
Sector: Industrials
Last Trade (AUD): 2.9 +0.03 (+1.05%)
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1. About

Air New Zealand is an international and domestic airline group which provides air passenger and cargo transport services within New Zealand, as well as to and from Australia, the South West Pacific, Asia, North America, and the United Kingdom. Air New Zealand also encompasses business units providing engineering and ground handling services. Subsidiaries extend to booking systems and travel wholesaling.

2. Business model


The Company operates the following divisions:[1]



Revenue ($M)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

New Zealand


59.6 %


Operating revenue grew 7.4%, and was the key driver of earnings growth this year, as the Company’s diversified network saw continued strong demand and positive pricing dynamics across most of the major markets. Significant growth across the cargo and contract services businesses also contributed to the strong revenue performance in the year

Australia and Pacific Islands




United Kingdom and Europe

$ 274











3. Strategy


Key strategies include:[3]


Air New Zealand is making strides in delivering the diversity and inclusion objectives defined in the Diversity & Inclusion Strategy to 2020.


The four strategic Diversity & Inclusion objectives are:

Attract and recruit diverse talent

In the 2018 financial year, the talent attraction and selection processes were refined to attract diverse talent and ensure they were more inclusive by:

  • No longer asking candidates for current salary to minimise bias and risk of inheriting the gender pay gap from other organisations, as well as no longer sharing historical salary data with hiring managers
  • Ensuring at least one female on every Senior Leadership Team role shortlist
  • Encouraging gender balanced interview panels
  • A guide for recruiters and managers to create a fair, consistent and inclusive recruitment process


Develop its diverse workforce

The focus continues to be on gender equality and gaining greater female representation on the Senior Leadership Team level and within groups such as Pilots, Engineering and Maintenance and Digital. The previous 40% target has been increased to 50% representation of women in the Senior Leadership Team by 2020.


Create a culture where everybody thrives

Air New Zealand has a wide range of employees from diverse backgrounds. The employee networks play a pivotal role in creating an inclusive culture. The Company supports five employee networks: Women’s Network, Young Professionals (Yopro), Ma-ori and Pasifika (Manu), Pride(LGBTQI) and the Kiwi Asia (KASIA) employee network launched in March 2018. Alongside these networks, to address the under representation of women in male dominated teams, the company have supported groups such as Women Inspiring the Next Generation of Female Pilots (WINGS), Women in Engineering and Maintenance and Women in Digital.

In the 2018 financial year, the networks hosted 39 employee network events attended by over 2,000 people. Air New Zealand is committed to ensuring that its leaders and key decision makers have the tools to mitigate the effects of unconscious knowledge and bias and the Company is putting programmes in place for 2019.


Future-proof (retention and transition)

Air New Zealand is looking ahead to the future of work, and the company is committed to creating an empowering and engaging environment for a multi-generational workforce. The company is investing in a comprehensive needs analysis and investigation process to gain a deeper understanding of the needs of the ageing workforce.


2019 outlook

  • Based upon current market conditions and assuming an average jet fuel price of US$85 per barrel, 2019 underlying earnings before taxation is expected to be in the range of $425 million to $525 million.
  • This excludes an estimated $30 million to $40 million impact from schedule changes prompted by the global Rolls-Royce engine issues

4. Markets



Industry (Australia)

Industry Revenue (2018)

Growth rate(annual 13-18)

International Airlines

$24 billion

2.0% (annual 14-19)

Domestic Airlines

$13 billion


Travel Agency and Tour Arrangement Services

$8 billion


5. Competition


Major competitors include:[5]


  • American Airlines Group Inc (NASDAQ: AAL)
  • Qantas Airways Limited (ASX: QAN)
  • Virgin Australia Holdings Ltd (ASX: VAH)

6. History



Forerunner airline, Tasman Empire Airways Limited was incorporated



Tasman Empire Airways Limited was renamed Air New Zealand Limited



Merged with NAC, forming the first New Zealand carrier to both international and domestic services



Became a full member of the Star Alliance Group



Began a fleet renewal programme and confirmed an order for 14 new Airbus A320s



Launched Direct services between Auckland and San Francisco



First Boeing 777-300 aircraft touched down in Auckland on Christmas Eve morning, bringing the Kiwi designed Skycouch to New Zealand for the first time



Teamed with Kiwibank launched Airpoints earning credit card



Air New Zealand announced it would begin flying direct to Singapore via an alliance with Singapore Airlines, with the first tickets went on sale in September 2014



Announced plans to operate direct flights between Auckland and Argentina’s vibrant capital, Buenos Aires. The three times weekly return service operated by a Boeing 777-200 aircraft with tickets on sale in March and flights commenced in December 2015

United Airlines enters NZ market in cooperation with Air NZ



Air New Zealand announced sale of 19.98% stake in Virgin Australia



Air New Zealand establishes sponsored level 1 adr programme with Deutsche Bank



Air New Zealand and Virgin Australia to end trans-Tasman alliance

7. Team


Board of Directors[7]


Antony (Tony) Carter – Chairman[8]

Janice (Jan) Dawson, Deputy Chair – Independent Non-Executive Director

Robert (Rob) Jager – Independent Non-Executive Director

Linda Jenkinson – Independent Non-Executive Director

Rt Hon Sir John Key – Independent Non-Executive Director

Jonathan Mason – Independent Non-Executive Director

Dame Therese Walsh – Independent Non-Executive Director, Chairman-elect


Management Team


Christopher Luxon – Chief Executive Officer

Jeff McDowall – Chief Finance Officer

Jodie King – Chief People Officer

Cam Wallace – Chief Revenue Officer

Nick Judd – Chief Strategy, Networks & Alliances Officer

Captain David Morgan – Chief Operations Integrity & Standards Officer

Mike Tod – Chief Marketing & Customer Officer

John Whittaker – Chief Air Operations & People Safety Officer

Carrie Hurihanganui – Chief Ground Operations Officer

Avi Golan – Chief Digital Officer

Jennifer Page – General Counsel and Company Secretary

read more

8. Financials


2018 Full Year Results Presentation


Financial Year 2017/2018 (ended 30 June):[9]



Revenue ($M)

% Change

Profit (before Tax,) ($M)

% Change

New Zealand


7.4 %



Australia and Pacific Islands





United Kingdom and Europe

$ 274



















9. Risk


Major risks include:[10]


Credit Risk

Credit risk is the potential loss from a transaction in the event of default by a counterparty during the term of the transaction or on settlement of the transaction. Air New Zealand incurs credit risk in respect of trade receivable transactions and other financial instruments in the normal course of business. The maximum exposure to credit risk is represented by the carrying value of financial assets. Air New Zealand places cash, short-term deposits and derivative financial instruments with good credit quality counterparties, having a minimum Standard and Poors’ credit rating of A- or minimum Moodys’ credit rating of A3. Limits are placed on the exposure to any one financial institution.


Foreign Currency Risk

Foreign currency risk is the risk of loss to Air New Zealand arising from adverse fluctuations in exchange rates. Air New Zealand has exposure to foreign exchange risk as a result of transactions denominated in foreign currencies, arising from normal trading activities, foreign currency borrowings and foreign currency capital commitments, purchases and sales. The documented risk management approach (as approved by the Board of Directors) is to manage both forecast foreign currency operating revenues and expenditure and foreign currency denominated balance sheet items. Hedges of foreign currency capital transactions are only undertaken if there is a large volume of forecast capital transactions over a short period of time.


Fuel Price Risk

Fuel price risk is the risk of loss to Air New Zealand arising from adverse fluctuations in fuel prices. Air New Zealand enters into fuel swap and option agreements to reduce the impact of price changes on fuel costs in accordance with the policy approved by the Board of Directors. Uplift in the first three months is hedged between 50% and 80% with the volume falling to 20% in the twelfth month.


Interest Rate Risk

Interest rate risk is the risk of loss to Air New Zealand arising from adverse fluctuations in interest rates. Air New Zealand has exposure to interest rate risk as a result of the long-term borrowing activities which are used to fund ongoing activities. It is the Group’s policy to ensure the interest rate exposure is maintained to minimise the impact of changes in interest rates on its net floating rate long-term borrowings.The Group’s policy is to fix between 70% to 100% of its exposure to interest rates, including fixed interest operating leases, in the next 12 months. Interest rate swaps are used to achieve an appropriate mix of fixed and floating rate exposure if the volume of fixed rate loans or fixed rate operating leases is insufficient.


Liquidity Risk

Liquidity risk is the risk that the Group will be unable to meet its obligations as they fall due. Air New Zealand manages the risk by targeting a minimum liquidity level, ensuring long-term commitments are managed with respect to forecast available cash inflow and managing maturity profiles. Air New Zealand holds significant cash reserves to enable it to meet its liabilities as they fall due and to sustain operations in the event of unanticipated external factors or events.


Capital Risk Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to continue to generate shareholder value and benefits for other stakeholders, and to provide an acceptable return for shareholders by removing complexity, reducing costs and pricing the Group’s services commensurately with the level of risk. The Group is not subject to any externally imposed capital requirements.