'Witch's brew': Air NZ boss Greg Foran signals more turbulent times ahead in 2025

Friday, 20 December 2024

The turbulent times Air New Zealand has experienced in 2024 are set to continue in 2025, with more delays to routes and the delivery of its retrofitted Dreamliners. Chief executive Greg Foran spoke to Stuff senior travel reporter Emma Stanford about the year that was and the year ahead.

2025 could be off to a bad start for Air New Zealand. A fifth Boeing 787 Dreamliner is estimated to be grounded at the end of January.

Air New Zealand grounded a fourth Dreamliner in November due to ongoing issues with the Rolls-Royce Trent 1000 engines. Two of them are in Alice Springs.

Chief executive Greg Foran said grounding a fifth plane will depend on when the engines come back from Rolls Royce in the UK.

“We've made the decision to plan for that. We'd rather deal with any disruption and give customers time to plan rather than throw it on them last minute. This has been one of the challenges that we've had to deal with during the year. Rolls-Royce will give us a view as to what they think's going to happen, but that could change six times during the year, every two months.”

Foran has recently returned to New Zealand after visiting Rolls Royce, Pratt and Whitney and Airbus and told RNZ last week that engine disruptions would carry on for at least another two or three years.

He explained that the solution to the Trent engine problem was a new blade which then has to go through multiple test flights and get approved by the US Federal Aviation Authority.

'Instead of these things getting done in weeks, they take months and years. Not only do you have to produce it, that requires all these minerals and specialist engineers to make it, but then you got to get it tested and then you've got to get it passed through the regulator. So, that's why it's taking so long.'

Meeting with Rolls Royce and Pratt and Whitney, manufacturers of the troubled engines in the 787 Dreamliners and A321s, was important to keep the pressure on them and negotiate compensation for the $150 million in cost Air New Zealand was incurring, Foran said.

'That's not just the fact that we can't fly the planes, but we've had at least three [Boeing] 777s that are ex-Cathay Pacific planes just to try and keep our schedule operating. Those planes come with different seats and different galley carts and so you've got to get different parts. The complexity that all this stuff adds in is considerable.

“We do get some compensation. Frankly, it doesn't pay for the disruption and that's one of the challenges that we've had in terms of hitting our profit targets. We get compensated to the tune of cents in the dollar.'

Engine issues delay routes and retrofits

The engine issues are having wider effects on the airline being able to expand its routes.

There has been much speculation about Air New Zealand flying to London’s Gatwick Airport, but it’s unlikely to be until 2026.

Foran said it did have slots to start using in April but he was “devastated” to have to give them back as it doesn’t have the planes.

“But the good thing is, the dialogue is there. We'll continue to stay close to Gatwick. Maybe in a year's time, when we're sure that we've got some planes out of Boeing, and maybe we've got fewer planes that have got engine issues, we can start flying back to London. We're pretty excited about that.”

The airline has had aircraft on order from Boeing since 2019. Foran said he thought the earliest Air New Zealand would get them was the beginning of 2026.

“We'll also see what we can do in terms of India in due course as well,” he said.

Flights to Chicago will not be coming back in the second half of 2025 as earlier reported, but now in 2026.

In April, Air New Zealand said it expected to restart its flights to Chicago when it received the new 787s.

“I don't think we can make that work in 2025, simply based on the fact that the engine issue that we're dealing with Rolls on the Trent is not giving us more planes back,” Foran said.

“We'll be in that holding pattern for longer. So, Chicago, unfortunately, we're talking about 2026 at best.”

Another delay plaguing the airline was the delivery of its retrofitted Boeing 787 Dreamliners. They are not expected to arrive back in New Zealand from Singapore until March, before they then take customers to New York later in the month.

The newly-renovated planes had a previous delivery schedule of mid-January 2025 then taking customers in mid-February.

Foran said supply chain issues were at play.

“We're trying to get wiring kits. We're trying to get seats approved. There's probably a million parts on a plane….You don't fly them when you're missing one, so you gotta get them all and they come from thousands of different suppliers.”

All of these setbacks, Foran said, were something that “happens sometimes” and it just had to be patient.

“Planes take off into the wind so we're sort of used to headwinds.”

Domestic flights

In the last two months, Air New Zealand has cut capacity on several routes. Flights between Invercargill to Wellington will stop from January 19, 2025. The airline said engine issues and softened demand were to blame.

From February 2025, the first flight of the day from Queenstown to Christchurch will be reduced by more than 100 seats due to lower demand and daylight operating limits for turboprops.

Dunedin to Wellington will also be downsized from a jet to a turboprop, while there will be three fewer flights a week between Christchurch and New Plymouth.

The airline will also reduce seats on its domestic network by 2% between February and June 2025 due to softened demand.

Any more cuts in 2025 will 'depend on how we see the economy going,' Foran said.

'I'm very happy actually with how we're navigating what is a reasonably complex witch's brew at the moment.'

He said with government and corporate spending down and tourism only at 83% of pre-COVID levels, 'the fact that we've only reduced capacity by 2%, it's pretty exceptional.'

The airline hoped to reduce the number of calls to its call centre when schedule changes are made with a new digital tool.

'Over the next six to nine months, 95% of our customers will actually self-select whatever they want to do if there happens to be a disrupt. That's a real bonus, not just for the customer, but a bonus for us in terms of a call centre that, if I go back two years, we would get 90,000 calls a week. That's now down to 20,000 calls.

'I want to get that down to literally just a few 1000. We'll always have a call centre for really complex bookings, but increasingly, in a digital world, giving customers the ability to serve themselves as a solution.'

Foran said the airline did not take for granted the fact that it is the only airline to fly some routes in New Zealand.

'We take it very seriously that our role and our purpose is to ensure a connection. We don't operate this business simply on the basis of what is the return on invested capital. That is a component of how we make decisions, but it's not the only component.

'There are routes that we do well on, others that we don't do so well on, and on those ones we don't do so well on, we stick at it, because we know that we've got a responsibility to continue to fly there.

“I have a lot of empathy for what customers had been experiencing this year. It feels like prices can be high at times, and it feels like the schedule gets disrupted.

'We do a good job of controlling what we can control. The other bits that we can't control, we do our best to manage around that.

'I'm actually very proud of the way the whole operation is going. We haven't shut up shop.

'We have continued to invest in this business, whether it's buying new ground service equipment, building new hangars, safety videos, new digital tools for our customers, for our frontline staff, purchasing sustainable aviation fuel. The list is significant.'

Foran was also proud of the fact that it has developed some world firsts.

'We will be the first airline in the world to have Starlink on a turboprop flight. That's coming early next year. You may be able to watch Netflix.

'We will be the first commercial airline in the world to have an electric aircraft. You'll see that in March, April next year.“

Being able to pre-order meals before getting on the plane was being worked on, Foran said.

Air New Zealand will also debut its new uniform in 2025, SkyNest bunk beds in 2026, while two Airbus A321s were due to arrive in mid-2025 and turboprop ATRs in April.