Christopher Luxon has had his toughest year at the top of Air New Zealand.
Although the airline continued its outstanding financial performance, the Dreamliner engine issue has plagued the airline, forcing it to revamp schedules and charter planes he concedes have resulted in ”sub-optimal” experiences for passengers.
The airline’s been drawn in to a rolling maul with self-proclaimed regional champ Shane Jones over issues ranging from air services to the provinces to the merits of its latest inflight video. And to cap off a difficult 12 months a nasty industrial dispute flared with engineers which threatened to disrupt Christmas.
Resolved at a late stage, the airline didn’t escape part of the fallout from disgruntled passengers wondering how it got to the point it did.
But 2019 is a whole new year for the airline and Luxon, who has been chief executive since 2013.
Speaking on the inaugural flight to Chicago, he said the airline was poised to make decisions which will change the look and feel of the airline into next decade.
It all starts with the long haul hardware. The airline’s nine Boeing 777-200s are up for replacement as at nearly 13 years old on average they are almost twice the age of the rest of the fleet.
Requests for proposals are out with aircraft manufacturers Boeing and Airbus which are building new planes that can fly longer with more passengers than the aircraft they will replace.
As the airline starts thinking about going to Rio de Janeiro and Sao Paulo in Brazil, and New York sometime in the next decade. In the frame are Boeing’s 777X which has yet to fly, Airbus A350 and – quite possibly the plane with the insider running – a newly configured Dreamliner.
”The 787 [have] proven to be highly successful and continuing to improve as a platform so that’s an interesting proposition,” he says.
Boeing had been talking about getting more range from the plane.
Opting for an Airbus A350 would be a surprise. The airline has used Boeing planes for its long-haul operations for decades and a completely new aircraft from a different manufacturer would require a shakeup in crew training, maintenance and support infrastructure.
The large size of the 777X, and the fact it won’t be proven in commercial service by the time Air New Zealand needs to replace its 777-200s, will also come into play.
‘That’s the whole question – what do you configure with payload and get to those long-haul destinations.”
The airline’s ”code 2” Dreamliners used on the 13,200km Chicago leg have 55 fewer economy seats and more premium seats than earlier model ones. Those in business and premium economy mean a better yield for the airline.
And fewer seats mean less weight and more range, crucially for flying one leg of a round trip into prevailing winds.
”We’re starting to think could we do a code 3 and take another 30 economy seats off.”
Singapore Airlines has set the bar, flying the longest route in the world between Singapore and New York using a plane with just 161 premium seats.
Although Air New Zealand’s riding the growing trend to more leisure customers flying up front, it’s not going to follow that lead and do away with economy class.
New planes give the airline the opportunity to fit them with new interiors.
For most of this year, work has been going on behind closed doors in a space dubbed ”Hangar 22” to design a new interior, starting with business class seats to replace the herringbone design that has been in Air New Zealand’s business premier for around a decade.
They don’t offer the same privacy as other business class seats on other airlines and frequent flyers and overseas experts are giving advice on new ones.
”What you have to do is go back to basic fundamental research and find out what our customers like about our current offering, what would they like to improve. One of the things we’d really like to improve is the sense of space and storage.”
In economy, airlines have to provide entertainment for passengers to put up with long flights, in premium economy it’s about extra space while in business the key is providing a good bed to sleep on.
”We’re starting that process right now – there’s a series of seat manufacturers coming in from around the world, we’ll work out what needs customisation and how we integrate it into a cabin.”
Luxon says airlines have to maximise the value of the real estate – some of the most expensive in the world.
To start a new long-haul route costs about $300m to $400m for two planes and $150m a year to keep them running. They have to be 80 per cent full to make a new service pay.
New planes and interiors also gives the airline the opportunity to introduce different ways of delivering service and as part of the blank canvas approach, existing ways of doing things could be on the way out.
”Why do we keep serving meals when it suits us instead of the customers – when we go out on a Saturday for brunch mixing carbohydrates with protein in assembled food at the time that works for us.”
Airlines such as Qatar have a dining on demand system – food when the passengers want it.
”Is there a way that we could avoid forcing people to wake up now and ‘you’re going to have breakfast whether you want or not’?”
Singapore Airlines allows premium passengers to pre-book meals.
Luxon says Air New Zealand is also looking at this. Not only would it meet passenger needs but could avoid wasting food that isn’t taken off the trolley, saving weight on planes and fuel.
The new planes will also have crew in new uniforms with a replacement programme is underway.
This multi-billion dollar investment in aircraft comes after consistently high profits through growth and also attention to cutting costs.
”The thing that I’ve learned over seven years is that we have this virtuous model. We want to have top line growth to be able to get to Chicago and make sure its profitable from day one – when we do that we grow the company,” he says.
In the year to June, the airline found savings of $105m in scale benefits. It is on a drive to find more savings this year but Luxon says it won’t be from customer-facing areas, ”not mindlessly cutting but being really surgical”.
This has included reducing flying on some routes, although the Dreamliner engine issues have also contributed to this.
”In higher fuel environments got to make sure that cover all costs. In this, we can’t cover through pricing action so we use cost-cutting and capacity reductions where it makes sense.”
Air New Zealand would make a decision on the new planes by April. It also needs to make a big call on what will power them.
Rolls-Royce and General Electric have both been on sales missions to this country.
Luxon says the unfortunate experience his, and other airlines, have had with Rolls-Royce Trent 1000 engines would not colour the decision.
”We’re able to compartmentalise that – we don’t feel there’s any contagion or worry about the 787 engines,” he says.
Jet lag – How does Luxon cope?
Christopher Luxon is one of Air New Zealand’s most frequent flyers. He says he ”hates to think” how often he’s on a plane.
How does he cope?
On a long-haul flight he says he typically lets everyone go through meal service and then gets up and talk to the staff for two to three hours, reads, does Netflix binges (if the in-flight entertainment is no good on another airline). And if he’s got time, has a decent sleep.
”I’ve found it a great time to get some work and thinking done, for me personally when I’m on an Air New Zealand plane its a great opportunity to meet our people and find out what’s really going on,” he says.
He doesn’t drink alcohol and that helps.
”I take on a lot of water – it’s quite helpful that I don’t drink and I make myself take on more water than I need to.”
He clicks quickly on to the time zone he’s heading too.
When he returns home he uses time travelling from the airport to re-orientate himself and tries to leave jet lag behind.
”I’ve always had a belief when I come back home that when I walk through that front door I’m on. It’s not family’s problem that I’m tired or jet-lagged – that’s for me to deal with,” he says.
”I’ve seen a lot of guys do a slow recovery after a long trip – I move very quickly into family mode.”
Those rumours he’s about to stand for National
”I’ve got no idea where it comes from – I’ve said it before that as a business leader there is lots more I can do.” He chairs the Prime Minister’s Business Advisory Council.
”I think at the moment this is what I can do really well.”
”I have nothing further to say on that.”
Air New Zealand service
”There are massive expectations that come from our customers and rightly so. They’ve got used to the consistency in the fleet and new lounges that go into the regions and those expectations continue to rise. They are a really difficult set of customers to satisfy and we like that because it forces us to be better than our competitors who are much larger and better resourced.”