Air NZ’s Foran: I’m in this for the long haul

Airline rethinks in pandemic — will it mean cheaper fares?

Ayear ago, Greg Foran was welcoming Air New Zealand’s rescue mission from Wuhan in China — a flight that signalled the coming upheaval in aviation.

He’d started as chief executive just days before the mercy flight, at the start of a year when the airline had big plans for expansion. He now heads a company with a workforce a third smaller than when he started, and the airline is flying just 5 per cent of its previous international network. Today it is effectively a domestic carrier with international cargo links.

Covid-19 has devastated its financial position and this year it will report another heavy loss for the past six months.

Foran has been stoic and philosophical about starting just as the worst financial crisis in aviation hit.

“There are two ways you can look at it,” he says. “You could go ‘woe is me, this is terrible timing’ and ‘what am I doing?’ or I could say, ‘what a wonderful opportunity’,” he tells the Weekend Herald.

“And I’m always of the view this is a wonderful opportunity to have a rethink about Air New Zealand, what it can be in the new abnormal on the other side of this.”

The long view

Foran, 59, came to Air NZ after a career in retail which included running the giant Walmart in China and the United States. While there has been market and industry chatter about how long he will stay at the airline given his fondness for retail, he says he’s never left anything undone in other jobs.

And that could mean up to five years in a job he describes as a privilege to do.

“I got that Walmart business to a

point where those stores were really hammering and going well.

“You can see that not only in the results, but more importantly you can see it in the way that associates [staff members] became engaged in the business and we moved pay, we dropped prices, the quality of the products improved, fresh [foods] improved, we developed out an online grocery offer.

“So I don’t leave things unfinished.”

How long could it take to lead Air NZ out of the pit it is in? He says: “You

don’t really make any progress in these jobs unless you’re in it for four to five years.”

Keeping Govt onside

Air NZ is 52 per cent owned by the government, which has an option to convert its $900 million backstop loan to equity.

Foran says dealing with the extended Walton family, who had the same stake in Walmart, was good preparation for the airline job.

The Government regards Air NZ as too important to fail but retains an arm’s-length role in its operations.

“I’m used to the fact that I have to deal with a shareholder that has not just a situation where they can count

the votes, but they can weigh them as well. And that’s the reality of the situation now,” Foran says.

The relationship with the shareholding minister, Finance Minister Grant Robertson, is a good one.

“It’s absolutely fine, very transparent. That’s the way that I’ve always operated in my career, I’m very transparent and very upfront, I don’t play games.”

Dealing with the Government is made easier by the fact that it and Air NZ share the same goals: connecting Kiwis with each other and moving people and cargo to and from this country.

“The principles by which we operate are actually aligned with what the

Government wants. Both of those are completely aligned with the Government, so there are no real issues or changes for me, to be honest.”

Although the resumption of international flights continues to be one step forward, one step sideways — or backwards — as Covid dictates, countries are moving at different speeds to vaccinate and open up, causing more complexity.

But Foran is optimistic. About 40 cabin crew were rehired last month on short-term contracts, in anticipation of quarantine-free return flights across the Tasman; work continues on a two-way travel bubble with the Cook Islands; and the domestic network is humming.

“There’s light at the end of the horizon.”

That doesn’t diminish the pain of the last year, when the airline laid off about 4000 staff.

“It’s significant to lose over a third of your workforce, but also appreciate that over two-thirds of Air New Zealand’s business was flying outside of New Zealand,” he says.

“It’s not hard to see that you end up with the sort of equation that you’re in, and you’ve still got a business which will make a significant loss this year and is still burning a lot of cash (between $65 million and $85m a month).” The Government wage subsidy the airline claimed was equivalent to about 13 weeks’ payroll.

He says rebuilding a good relationship with staff is a priority. This would involve “over-communicating” and being available to staff at all times.

E tu¯, the union that represents many in a highly unionised workforce, is optimistic about a shift in culture, especially now Nikki Dines has the top human-resources role. Dines, chief people officer, has been at the airline nearly eight years and replaces Joe McCollum, who was in the role a year when jobs were slashed.

“We’ve only seen Greg Foran in the context of the redundancies and the pandemic,” says said E tu¯’s aviation head, Savage. “As we start to rebuild the industry, we are confident that he is open and honest to deal directly with the unions in a way that [his predecessor] Christopher Luxon never did.”

Foran, board members and some of the much-changed executive (30 per cent smaller than at this time last year) have had a 15 per cent reduction in their base salary since March 2020. This, with non-payout of their short and long-term incentives, effectively translates to a 40-50 per cent drop in overall annual remuneration.

Foran’s base salary of $1.62m last year was a far cry from the US$13.4m ($19m) he was paid in 2018 as CEO and president of Walmart USA.

Close to home

Foran hasn’t been able to join the stay-at-home tourism wave — he’s had only a few days off during summer.

He says changes loom for the domestic operation. That operation is without the international visitors who usually take domestic flights, accounting for about 25 per cent of what was a business with $6 billion in revenue before the pandemic.

“One of the things that a crisis like this does is it provides you an opportunity to really rethink about how you do it. Clearly we’ve still got a responsibility to get a return on invested capital so it’s not just a matter of dropping the prices on everything and saying ‘I don’t need to worry about getting a return on people’s investment’.”

The airline is frequently criticised for the high full fares it charges, especially to the regions. Foran counters that millions of seats a year sell for less than $100.

Asked whether the review will lead to lower fares across the board, he says: “Let’s see, but clearly that is one of the objectives.”