Flying to the future
Air New Zealand’s new director has extensive experience in American aviation and travel businesses
Air New Zealand director Larry de Shon grew up in the airline business, starting on the frontline at United as a teenager. “I started at the airline when I was 18 years old, cleaning planes and loading planes and working every position at an airport that you could have.” He went on to spend 28 years with United Airlines, where he held a range of executive roles across key business areas including marketing and on-board service.
As head of worldwide airport operations, he oversaw the airline’s ground operations, logistics, safety, customer service, product development and internal communications teams.
Like Air New Zealand chief executive Greg Foran, he joined the Kiwi airline in the worst-ever year for the industry commercially. He was appointed to the board on April 20 when Air NZ’s planes were nearly all grounded and aviation was paralysed.
Out of the eight-member board, he is the only one to have an airline background.
“The timing wasn’t perfect with Covid unfolding at the time. I think in some ways it’s better to go through that as a management team as it makes coming out the end of that even that much more special,” he said from his home in Florida.
He was senior vice president of marketing when two of the airline’s planes were used in the 9/11 terror attacks and the subsequent bankruptcy protection. He was at a Star Alliance conference in Tokyo when the aircraft were hijacked and aviation was suddenly changed forever.
From that crisis, he learned some lifelong lessons for dealing with staff and stakeholders.
“You’ve got to continue to share information over and over again because people are afraid. They see the airline and the industry that they really love going through such a terrible time — they want answers.”
Even if you don’t have answers, you just have to constantly communicate on the status of the business. “You give people comfort that we are going to get to the other end of this, and then at some point you start to show them what the other end looks like so that they can have some real hope about what their life will be when they get through.”
United States airlines were the worst affected by the terror attacks but most recovered after some painful restructuring, mergers and a shift in business models. For several years leading up to 2020, the global industry enjoyed a rare status; it was making profits across the board. Then Covid struck. “There’s no playbook for this, the industry hasn’t been through anything like this.” The worst commercial crisis in the sector’s history means capacity is back where it was in 2003, more than 30 airlines have failed (although many are still flying under bankruptcy protection) and hundreds of thousands of jobs have been lost or supported with government schemes.
Some estimates push out the recovery to 2019 levels as far out as 2024 or beyond. De Shon isn’t that pessimistic.
“I always pick the optimistic scenario but I do believe that when the vaccine starts hitting and the fact that the efficacy of the vaccine is so much better than anyone could ever hope.” Crucial was getting airport staff and airline crews vaccinated — he can’t wait to roll up his sleeve for a jab himself.
“I’m hoping 2022 gets a lot closer to where we were pre-Covid. I think 2021 is going to be ramping back up month by month by month as we go through the year once the vaccines start to hit a large level of population and once we get some borders open.” Although the impact of the global economic downturn would stymie recovery, there was huge pent-up demand to fly. While it’s likely the friends and family travel market will be the first to recover, de Shon pushes back on reports of the long-term demise of business travel, crucial to airline profitability.
“I talk to people in other businesses and people here in the US want to get back on planes, they want to get
to doing business face to face.”
At the beginning of the pandemic, many enjoyed remote working and virtual conversations. This has worn thin.
“They want to be back in the office they want to be able to read people’s faces, they want to be able to have the side conversations, and they want to get out and talk to our customers.” He says there were similar views on business travel after the 2001 attacks.
“I remember these conversations after 911 that people will be afraid to fly and that they won’t travel as much . . . but in the end people wanted to get back out get back on the road and get face to face.
“Just like on the leisure side want to have experiences, you want to go see family you want to go see friends. It’s one thing to do it over video but it’s nothing to be in the room with them.”
Since being appointed to the Air NZ board, de Shon has felt that frustration himself, unable to get to New Zealand instead being beamed in virtually from his home.
“You want to be in the room, you want to be face to face with the team, you want to be able to get out to the airports and talk to the frontline employees on the airplane and you can’t do that right now. It’s incredibly frustrating, but it’s working and we’re doing the best that we can to use this technology as a way to get through.”
Why Air New Zealand
Just prior to joining the Air New Zealand board, de Shon has finished as chief executive of Avis Budget Group, where he was responsible for more than 30,000 employees globally.
The board offer was too good to turn down. He was well aware of Air New Zealand, long a Star Alliance partner of United, and the two airlines have deepened their commercial relationship over the past few years.
“There was a lot of respect for Air New Zealand — it is a great company, great service, wonderful people.” Other board members he spoke to were “tuned in” to the airline and its future.
He also aware of chief executive Greg Foran, who came from running Walmart in the United States.
“I just knew of him. Being CEO of Walmart was such a gigantic role and I was very intrigued by him running Air New Zealand and I thought I could help having a long history in the airline business.”
The Air New Zealand board has never been busier.
Activity has been unprecedented during the year, with 20 board meetings and more than 20 meetings for the board’s five committees (including a new Covid committee). This compares to a normal 10 meetings per year at most around 10 committee meetings.
The airline was to have launched a non-stop Auckland to New York flight in October, the most ambitious step of a strategy to fly deep and frequently into the United States to tap into the market of Americans with this country on their bucket list.
De Shon says this momentum can be restored given existing growth in interest in the country and helped enormously by success to date fighting Covid-19.
“Americans look at that and they see New Zealand as not only a beautiful place to go, but a safe place to go, and you can’t help but be totally in awe of how the Government has handled this crisis in New Zealand.
“I’m sure people like me from around the world look at it with the same level of admiration.”
And he understands this government’s caution on reopening borders.
“Every airline is working with every government involved to try to find a way to do that and I think a lot of innovation and creativity will come out of that.
“But it needs to be safe, so we just have to make sure that we take it one step at a time. The vaccine helps us along the way but we need to make sure we get these borders open in a safe environment.”
Like other airlines, Air New Zealand was running a number of scenarios on the new aviation environment that will emerge.
“What does this look like, when will we start to be able to have these borders open again which ones will be first, what aircraft types you’re going to fly and how much demand will come back?”
The strength and pace of demand was critical. “It is quite complex. But every week you learn something more that allows you to kind of keep shrinking the scenarios down.”
Would Air New Zealand follow the Qantas idea of requiring proof of a vaccination before flying?
“I think Air New Zealand is looking at that and what that may look like — I’m sure every airline is doing that I know the several US airlines are working on apps on your phone to be able to prove that you have the vaccine.” The more people vaccinated on a plane would make others more willing to fly.
Low cost or legacy?
De Shon says a mix of legacy carriers — traditional full-service airlines — and low-cost carriers will emerge from the crisis. There would be further consolidation in the industry.
“But I think there’s still going to be a need for low cost. I think there’s still going to be a need for carriers that provide a different level of service, particularly when you get into a longer-haul flying.” Air New Zealand had more experience than most at long-haul flying so would be wellpositioned to take advantage of this.
Will there be a wave of new airlines, picking up cheap planes and cheap labour to throw them at new markets or existing airlines trying new routes?
“I think it’s there will probably be some attempts of that, I mean I have already seen over here in the US now that some airports are not as constrained as they were before and some airlines are jumping into those airports that they never served before.” Aviation was tough to get into right now.
“So if you’re a well-established airline with a customer base and a loyalty programme and the ability to communicate with consumers, I think you’re going to have a leg up to be able to build your schedules back up and build your demand back up versus somewhere trying to enter the market, and hit that from the beginning.”