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Air New Zealand Limited. New Zealand Society of Investment Analysts. 30 March 2001. Agenda. Organisation Changes Key Issues Outlook. Organisation Changes. Organisation Structure Performance Enhancement. Organisation Structure. Business Unit Structure . Functional Structure .

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Air New Zealand Limited

New Zealand Society of Investment Analysts

30 March 2001


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Agenda

  • Organisation Changes

  • Key Issues

  • Outlook


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Organisation Changes

  • Organisation Structure

  • Performance Enhancement


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Organisation Structure

Business Unit Structure

Functional Structure

  • 4 distinct Airline Business Units, all with individual reporting structures

  • Focus on cost reduction

  • Suited Air New Zealand but not the new combined group

  • Slowed the implementation of key strategies

  • One airline team split into functional areas - commercial, customer service and operations

  • Focus on revenue enhancement and the customer

  • Removal of duplicated activities

  • Speeds delivery of changes

  • Support functions largely unchanged


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A Moroney

CFO

& SVP

Finance

NZ

L Doolan

SVP Corp, Govt & Int Affairs

NZ

C Tremain

SVP HR & Org Change

NZ

G Frazis

SVP Strategy, Network & Marketing

Aust

Executive Management

G Toomey

Group President

& CEO

Ansett International

49% owned

A. Miller

SVP

Sales & Distribution

L Grant

SVP

CustomerService

T Jensen

SVP

Operations

B Fitzgerald

SVP Worldwide

Airport Svces

NZ

Aust

Aust

Aust

Aust

B Jacobson

SVPANNZES

NZ

TBA

SVP

Ventures

NZ

NZ

K Turnbull

SVP Business Performance Enhancement

Airline Functions

NZ

Support Functions


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Integration to Performance Enhancement

Integration Synergies

Performance Enhancement

  • Focused on integrating Ansett/Air New Zealand

  • Key emphasis on removing duplicated activities

  • Systems/procurement synergies

  • All encompassing profit enhancement program

    • Not only integration benefits

    • Productivity benefits

    • Business process improvements

    • Enhancement of other revenues

    • Disciplined approach to costs


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Key Issues Facing the Group

  • Australian Domestic Market

  • Fleet & Network

  • Management Information


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Market Share Versus Capacity Share

(Australian Domestic Market)

58%

QF RPK

56%

QF ASK

54%

52%

50%

48%

46%

44%

AN ASK

AN RPK

42%

40%

Jul 94

Jul 95

Jul 96

Jul 97

Jul 98

Jul 99

Jul 00

Mar 95

Mar 96

Mar 97

Mar 98

Mar 99

Mar 00

Nov 94

Nov 95

Nov 96

Nov 97

Nov 98

Nov 99

Australian Domestic MarketCapacity Share V Market Share


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Australian Domestic MarketAddressing Capacity Share

  • In order to keep pace with market growth and competitors, need to introduce additional capacity on the key routes in Australia

  • In July, 4 additional 767-300 (wide bodies) will commence services on the Golden Triangle (SYD-MEL-BNE)

  • This will increase capacity of Ansett’s domestic trunk network by approximately 10%


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Australian Domestic MarketCorporate Market

  • Until June last year, Ansett had been loosing corporate accounts

    • Was not competing on price

    • Did not have the international network offering of competitor

  • Impulse has also impacted Ansett’s share of SME business

  • However, since June 2000 this trend has stabilised and recent months have shown a positive win-loss ratio

    • Key accounts have been retained and new accounts have been won

    • Some yield decline due to competitive pressures

    • International network provided by NZ, AN international and SQ


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Fleet Renewal

  • Fleet changes will be the product of a revised network strategy and subject to balance sheet constraints

    Short term

  • Lease aircraft to meet capacity demand (e.g. 767-300’s)

    Long term

  • Reduction of the number of aircraft types across the group

  • Increased number of wide bodied aircraft

  • Rejuvenation of the Ansett fleet

  • Standardised product


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Network Changes

  • AN Int growth on key business markets ex-Australia are Tokyo, Hong Kong, Los Angeles and London

    • Ansett currently services Osaka instead of Tokyo

    • Standardise product on Hong Kong route

    • SYD-LAX services expected to begin in early 2002

  • AN Domestic network being reviewed

  • Refinement of NZ International services

  • Protection of position in NZ Domestic


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Management Information Improvements

  • Currently, Air New Zealand systems are adequate however Ansett systems are poor. This has lead to:

    • Lack of management information to understand what is driving the business

    • Many different systems being used and no central store of data

    • Inability to forecast accurately

  • Short term solution

    • Have implemented a series of “band-aid” solutions to gain a better understanding of the business and provide information for strategic planning

  • Long term solution

    • Single system with uniform data across the group

    • Additional analytical tools


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Outlook


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Pressure on Profitability Will Continue

  • Second half performance will remain poor

    • Substantial operating loss for full year

    • Traditionally a weaker half

    • Competition and discounting has intensified in Australia

    • Foreign exchange remains low year on year

    • Slowing Australian economy

    • Some relief from fuel prices

  • Longer term

    • Strategic plan for next 3 years to be finalised in July

    • Capital management / structure to be addressed

    • Business plans will take some time to implement

    • Future of competition in Australia is uncertain

    • Better management information will lead to informed decisions


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Air New Zealand Limited

New Zealand Society of Investment Analysts

30 March 2001


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