Air New Zealand Limited (AIR) Earnings Call Transcript

[Foreign Language] A very warm welcome to you all. Thank you for joining the Annual Shareholders Meeting. I'd like to now introduce the Chair of Air New Zealand's Board of Directors, Dame Therese Walsh.

[Foreign Language] Good afternoon, everyone, and welcome. My name is Therese Walsh, and I am the Chair of Air New Zealand's Board. It is a pleasure to welcome everyone online today to the 2026 Annual Shareholder Meeting. We welcome you from our state-of-the-art hanger for based in Auckland, which opened late last year. And in New Zealand, we are committed to making our shareholder meetings as accessible as possible. However, in light of this year's financial result and our current elevated costs we have considered all cost-saving initiatives and have chosen to hold the meeting virtually only today. The cost of holding an in-person meeting is not insignificant, but this is not a precedent for all future meetings, and we will consider all options and locations again each year. We hope that our virtual meeting will continue to support strong participation, engagement with our shareholders. And we encourage you to participate through the question-and-answer sessions. I would like to remind you that our comments today will include certain forward-looking statements regarding our future expectations, which may differ from actual results. We ask that you read through the disclaimer and forward-looking cautionary statement provided here on Slide 2 of the presentation. Before we begin our formal proceedings today, I would like to introduce you to my fellow Air New Zealand Board members. With me in person today and available for questions throughout the meeting are my fellow Board members Neal Barclay, Claudia Batten; Dean Bracewell, Laurissa Cooney, Larry De Shon and Alison Gerry. I would like to acknowledge Larry De Shon today, our U.S.-based Director, who has chosen to retire this year. Larry has 5 grandchildren now and are starting to scale back his governance work so he can spend more time with his growing family in the U.S. Larry has provided the airline with significant wisdom from his many decades spent in senior roles in the airline industry and as the Global President and CEO of Avis Budget Group. He has made a significant contribution to the Board and the organization through 1 of the most volatile periods in aviation history. His focus and advice on driving for better operational performance as a contributing factor to our improved performance today. Larry, many thanks for your contribution to Air New Zealand over many years. It is deeply appreciated, [Foreign Language]. Having airline experience on the board is important, and I mentioned at last year's ASM, the plan to add another airline expert to the Board in addition to Larry. With Larry's signal departure, that meant we search for 2 new directors with aviation experience. We have completed that search and our 2 proposed directors who are standing for election today are Campbell Wilson and Rob McDonald, and they are sitting here with our Board. Campbell, who has worked in senior aviation roles for decades, including 2 CEO roles. Firstly, at the Singapore Airlines owned scooter Airlines; and then at end, and he is relocating back to New Zealand. Rob is also Kiwi with much experience at Air New Zealand as a previous CFO of the company for 14 years and an employee for 25 years and has gone on to a successful governance career. We look forward to them contributing to the airline at such an important time. [Foreign Language] Also with us in person today is our Chief Executive Officer, Nikhil Ravishankar; our Chief Financial Officer, Kris Cudmore; our General Counsel and Company Secretary, Jennifer Page; Chris Goddard from Bell Gully, the company's lawyers; and Jason Stachurski from Deloitte, the company's auditor on behalf of the Auditor General. We also have members of Air New Zealand's executive team, our Investor Relations team and our share registrar, MUFG Pension and Market Services present today. Turning now to the formalities of the meeting. I note based on the information conveyed to me, there is a quorum of shareholders present, and I declare the meeting open. The Notice of the Meeting was circulated to was [Audio Gap] year that asked a lot from our New Zealanders. As highlighted in our 2026 annual results, as we came to the end of dealing with engine availability disruption, we were then faced with the Middle East conflict and unprecedented surge in fuel prices, which have impacted our operations and our financial performance. But our team took decisive and immediate action and adjusted operations schedules, capacity and fears to mitigate as much of this as possible for our customers, for our operations and for our financial resilience. Once again, our people delivered through persistent disruption, they remain committed to our customers, to each other and to the success of this airline. I want to sincerely thank each and every 1 of them for their efforts. Their efforts have delivered significant improvements in our customer satisfaction and on-time performance, and those are things that matter to our customers. Financially, FY '26 was a very difficult year. Our financial performance was significantly and adversely impacted by high fuel prices. This came on top of the ongoing impact of engine availability issues and maintenance and aviation system cost pressures, and I will address these financial impacts shortly. Standing back from financial performance specifically, I would like to call out 5 operational milestones during the year in review. Firstly, the operational performance of the airline in terms of reliability and punctuality improved significantly throughout the year with on-time performance and now in the top decile amongst global comparable airlines, This is the result of an extraordinary effort from Air New Zealanders across the business. Second, our team has worked relentlessly with Rolls-Royce and Pratt & Whitney to return grounded aircraft to service earlier than we expected and aircraft availability improved by the end of the financial year. There are still residual risk and cost to work through, but we enter 2027 and a considerably more reliable fleet position than we have had in the last 2 to 3 years. Thirdly, we continue to make progress on the things we can control and are accelerating the cost improvements at pace. We have already delivered $94 million of incremental transformation benefits during the year. And we have now identified an additional $135 million of annualized savings, including both direct and indirect costs. which will accrue from the 2027 financial year, and this will help to improve our overall cost base and offset expected inflation. This is an increase from the $100 million identified annualized cost savings previously announced in May, and this work is ongoing. And fourth, we have reset our strategy around 3 strategic pillars; customer first, targeted growth and resilient and future fit to deliver sustainable returns to shareholders over time. In addition, aviation system cost inflation continues to impact our financial performance. New Zealand aviation costs have risen at more than twice the rate of inflation since 2019. In New Zealand and our customers share of these aviation system charges across New Zealand and the offshore ports we fly to was $1.2 billion in 2026. That's a price increase of $142 million on 2025. However, remedying this will be a longer journey, and we continue to advocate for an affordable aviation system for all New Zealanders. Moving to Slide 8 and looking at the FY '26 results and performance in more detail. We recorded a loss before taxation of $336 million compared with earnings before taxation of $164 million in the prior year. and slightly better than the guidance range, which we provided to the market in May 2026. Approximately $465 million of the profit before tax was impacted from 3 areas, namely the ongoing global engine availability issues, which had an impact net of compensation of approximately $190 million. The fuel price, which had an adverse impact of $135 million in the year from an initial fuel place impact of $328 million, our hedging protection recovered $123 million of this cost increase. And through adjusting capacity and fears and response, we've been able to mitigate about 1/3 of the post-hedged fuel impact and an increase of $139 million in maintenance costs excluding FX, driven by additional life cycle maintenance and maintenance costs on leased engines associated with additional engines leased to maintain capacity and schedules during these engine availability issues that we have been dealing with. Our attention is firmly on mitigating these external pressures as much as possible controlling what we can control today and improving the commercial and financial pathway for the company. We carried around the same number of passengers as last year at 16 million passengers. While passenger revenue increased 4.8% and to $6.1 billion. While RASK increased 3.4%, it was not enough to cover the significant increase in fuel cost with about 30% of increased fuel price recovered through mitigating capacity and fare activities from March through to June. Given the price sensitivity of air travel, airlines globally have not been able to recover the full increase in fuel costs. We talk quick and decisive action through fear adjustments and capacity reductions to balance affordability for customers and maximize recovery, and we will continue to do so. Capacity increased 1.3%. And while above prior year, second half capacity was about 5% below our original plan as we adjusted to the sharp increase in jet fuel price from March. Our customer and operational metrics continue to move in the right direction. Our on-time performance increased to 84% in the second half of the year, up from 77.5% in 2025 and in the global top decile amongst comparable airlines. Our rebranded core loyalty program and new multi-tier membership originating well with our customers with 5.4 million loyalty members, which is up 8.3% on 2025. Safety will always be our utmost priority, and we are proud to be awarded AirlineRatings.com Seven Sar Plus safety rating in 2026. Moving to Slide 9 and the 2027 financial year outlook. Prior to the Middle East conflict, the airline would have expected and its central case to return to profitability in the 2027 financial year, reflecting the underlying improvements in the business. However, as mentioned at the 2026 year-end result, there remains uncertainty surrounding the Middle East conflict and effect, the volatility of jet fuel prices has escalated even further since then. Jet fuel prices have increased from around USD 150 per barrel at the end of August to currently around USD 170 per barrel today, and this fluctuates by the day. As a result, the airline is not in a position to provide earnings guidance for the 2027 financial year at this time, but we are controlling what we can control. And while the major factors that impacted the 2026 finance result are expected to have some impact in the 2027 financial year. These will all be to a lesser extent. Disruption from engine availability is reducing substantially as aircraft return to service. The financial impact of between $70 million to $90 million in 2027 from residual committed costs compared to $190 million impact in 2026. Maintenance costs are expected to be $50 million to $100 million lower in 2020 than in 2026. We are also seeing encouraging inbound demand with strong forward bookings into New Zealand. This is a positive signal for tourism and for the country more broadly. New Zealand remains a highly desirable destination and our investment in our onboard product and unique Kimi hospitality puts in New Zealand and a strong position to bring more international visitors to our shores. The airline expects the 2027 financial year to be both a transition and recovery year with operational performance continuing to improve despite elevated fuel prices weighing on profitability. We also expect the range of initiatives implemented in response to higher fuel costs to offset a greater proportion of the impact compared with the prior years. We remain focused on executing our strategic priorities improving financial performance, positioning the airline for long-term sustainable returns. And with that, I will now hand you over to our Chief Executive Officer, Nikhil Ravishankar, This is Nikhil's first Annual Shareholder Meeting as CEO. We are thrilled to have made an internal CEO appointment for the next phase of our journey, and Nikhil has certainly hit the ground running and is doing an extremely good job in difficult and volatile environment in the last 12 months. [Foreign Language]. Nikhil?

[Foreign Language] Good afternoon, everyone. When we announced Tapio, our future in June, the airline's new strategic plan, we set out 3 strategic priorities. The first priority is putting customers first, providing safe, reliable and punctual service for our customers, delivering unique key service and innovative products and increasing customer reach and sales with smarter and more relevant offers. We've already rolled out simplified granular and airport-specific scheduling across our domestic and regional network, which means realistic turnaround times and have invested in both tooling and procedures for our frontline teams. In combination, these are translating to significantly improved on-time performance. We're expanding this to our Trans-Tasman, Pacific and long-haul networks to further improve reliability and punctuality. We're investing in our service proposition and our lounge is grounded in our unique Kiwi hospitality. We're improving our disruption management and are continuing to modernize the way we market to our customers and how they buy from and interact with Air New Zealand. The second priority is targeted growth. This includes profitable network growth. transforming our loyalty program in line with industry-leading practice and thoughtfully diversifying our revenue streams where opportunities exist. This means winning on key customer segments across our network, including inbound premium leisure customers on our long-haul markets, leisure and VFR customers on our short-haul network and enterprise SME and corporate customers on our domestic routes. This priority leverages our new and retrofitted Boeing wide-body and Airbus narrow-body aircraft, which are fit for mission as well as strengthening our alliance networks transforming our loyalty program and expanding flight adjacent revenue. And third, resilient and future fit, removing cost and complexity improving label productivity, transforming engineering and maintenance, developing a financially sustainable regional network, unwinding the temporary inefficiencies created by fleet disruption and delivering on our capital management metrics. I will now go through each of these in turn. The customer first strategic initiatives we're putting in place are already delivering benefits for our customers. Our on-time performance increased from 77.5% in 2025 to 84% in the second half of 2026. Customer satisfaction increased from 83.6 to 84.5 and controllable cancellations reduced from 2.2% to 1.3%. Pleasingly, on-time performance improved further in August, with 85.3% of flights arriving within 15 minutes of schedule, up from 83.1% in July and 81.8% for the same time last year. This is well above the global average for airline on-time performance, which was 73.1% in August. These improvements matter to our customers. and they've been the result of detailed operational and resilience different review of our schedule, a focused program of initiatives across our team and the rollout of new digital tooling in support of operational communication and decision-making. We continue to invest in this area with a goal of consistently being in the top 5 airlines in the world for reliable and punctual operations. Under our second strategic priority, targeted growth the demand picture across the network in 2026 was mixed, but we are seeing solid inbound volumes across Asia, overall passenger growth was flat on reduced capacity but with higher inbound passenger volumes and pleasingly strong load factors and improved revenue per ASK. North America also delivered strong inbound volumes on slightly higher capacity although outbound New Zealand sales remained soft, in particular, reflecting the weak New Zealand dollar, resulting in flat passenger growth overall. Tasman and Pacific Island passenger volumes grew on strong capacity growth supported by strong inbound volumes out of Australia. Passenger capacity and cargo volumes were impacted in the second half of the year across all international markets with capacity lower than planned in the second half as we manage capacity in RASK to mitigate the surge in fuel prices. Domestic remains challenging. Passenger demand was down and the New Zealand economy remains soft. We've been disciplined in matching capacity to demand and where appropriate, using yield to respond to the higher fuel environment. More generally, we continue to see encouraging trends in product and cabin mix with premium cabin revenue increasing by 14% and ancillary revenue by 12%. Going forward, we're targeting sectors, destination and target markets to deliver profitable growth. We have completed 11 out of 14 retrofits of our Boeing 787 fleet, and the new interior product is resonating very well with our customers. The remaining 787 fleet retrofit will be completed by November this year, and the 777 cabin retrofit will be completed in calendar year 2027. And lastly, resilient and future fit. We continue to make progress on things we can control and are accelerating the cost improvement at pace. In 2026, we delivered transformation initiatives, generating an incremental $94 million of EBITDA benefit. This has come from a broad range of initiatives. Further, we've now identified an additional $135 million of annualized savings, including both direct and indirect costs, which will accrue the 2027 financial year to improve our overall cost base and offset expected inflation. In addition, we continue to work to build a financially sustainable regional network and deliver against our capital management metrics. It is well known that our operational and financial performance in the last few years has been hindered by our constrained fleet capacity due to the engine availability issues and resulting grounded aircraft. At the peak of the engine disruption, 5 of our 14 Boeing 787s and 6 of our Airbus A320 and A321neo aircraft were grounded, almost 20% of our total jet fleet. This created disruptions for our customers, operational complexity and significant financial costs. We've carried the fixed cost of aircraft, people, infrastructure and systems, and we incurred additional costs through leased aircraft and engines to protect the network and schedule. While we received some compensation from engine partners, this was not enough to offset the financial costs incurred. Today, the picture is very different. The last 787 was returned from long-term storage in June, an incredible milestone and a huge thank you to our teams around the business who persevered to make this happen sooner than expected. And on the narrow-body fleet, we expect the last of these to return to service during calendar year 2027. There are still residual risks to the availability through 2027. And we are still carrying the cost of temporary leased aircraft and engines in the system. It takes time to bring returning aircraft fully into the selling and operating schedule. And we're in continuous discussions with both Rolls-Royce and Pratt & Whitney on extending compensation. While risk remains the fundamental point is that the fleet constraint, which has shaped this airline over the last 3 years is materially reducing. And the airline enters the 2027 financial year in a considerably more reliable fleet position. This gives us more options around capacity, network deployment and operating efficiency. A key decision we have taken is to smooth the aircraft investment profile in the near term and to bring it down medium term. Following the most recent delays of the 2 Boeing 787s from earlier this year to later this year and a quicker-than-expected return of grounded aircraft, we're in negotiations with Boeing to further rephase the delivery profile to smooth capital investment and realign fleet deliveries with our targeted capacity growth. In 2027 financial year, given the additional aircraft capital investment, we do expect to see incremental depreciation of between $110 million to $130 million compared to 2026. But this depreciation profile will increase at a measured pace with the smoothing of aircraft CapEx investment. We want the right aircraft, but we also want them at the right time. In closing, this has been another demanding year for Air New Zealand, and our people have continued to rise to the challenges we have faced. I am incredibly proud of the commitment, professionalism and care they have shown for our customers and for each other. We have a lot of work to do to counter the impact of the fuel crisis, but we entered the new financial year with a very clear strategy, a strong operation and confidence in the future of Air New Zealand. Our customers remain at the heart of everything we do. We will continue to work hard to maintain and improve our operational performance while delivering the exceptional product and service experience our customers expect from Air New Zealand. We have one of the most valuable brands in New Zealand. We have the strongest loyalty program. We are consistently around one of New Zealand's most attractive employers and we're back to commanding strong customer preference. Thank you to those investors who have stuck with us over the last 6 years of crisis and continue to support Air New Zealand during this current fuel crisis. It is worth reiterating that prior to the Middle East conflict the airline would have expected in its central case to return to profitability in the 2027 financial year, controlling what we can control and reflecting the strong underlying improvements that we continue to deliver. Thank you. I will now hand back to Dame Therese to take questions on the 2026 performance and to chair the formal part of the meeting. Thank you.

Thank you, Nikhil. I now open the meeting to any questions you may have that specifically pertain to the company's 2026 performance. Any general questions you may have will be addressed later on in the meetings. Can I just check if there are any questions online.

Yes, we have 1 question. Regarding the performance, I noted that some space could be looked into to save the cost. For example, some special seats with extra room at the front, besides the security door are not being sold for extra money. This has been sold for extra cost in other airlines. Can the management look under such measures to make extra income and lower the cost?

Thank you for the question. When it comes to seat allocations and the sale of seats, we continue to optimize any ancillary revenue, which comes from that piece of work. And our ancillary revenue has been growing year-on-year. and customers continue to enjoy the option to select the seat they prefer. But as a key part of our strategy reset, we will continue to be looking at these types of questions as we go forward. So it's constantly under review. Thank you. Are there any further questions?

No further questions on financial performance at this time. Thank you.

Okay. Many thanks. All right. We now come to the formal resolutions of the meeting. The resolutions for consideration today may only be voted on by shareholders, proxy holders and shareholder company representatives. The matters to be voted on today are the reelection of 2 directors, being Dean Bracewell and, Laurissa Cooney who both retired by rotation. There are also 2 resolutions on the election of 2 new directors being Robert McDonald and Campbell Wilson. With respect to these 2 new directors for in New Zealand, our constitution requires that directors are appointed by the Board and then brought to the Annual Shareholders Meeting to retire and be reelected at the next meeting. As already mentioned, voting on all the resolutions will be conducted today by poll. For all shareholders online, please collect the Get Voting Card button and follow the instructions on screen. Thank you. The Company Secretary holds a record of the valid proxies and postal votes received in advance of the meeting. Before I put the resolutions to the meeting, you can see the results received of the voting directions given to proxies and the postal votes on the slide show in now. We will discuss and vote on each resolution in turn, and then MUFG Pension and Market Services will tally the votes at the end of the meeting. The first resolution relates to Dean Bracewell reselection reelection as a director. Dean has been with the Board for a few years now and is also playing the important role as Chair of our Board, Health, Safety and Security Committee. Dean continues to be a very additive presence around the board table and continues to be a strong advocate he has been since he joined of shareholder interests. I support the reelection of Dean and now invite him to give his comments in relation to his reelection.

Thank you, Dame Therese Walsh. [Foreign Language]. In addition to my role at Air New Zealand, I Chair the Board of Property for Industry Limited and I'm a Director of NorthPort Group Limited and Port of Tauranga Limited where I also chair the Board's Health and Safety Committee. I retired from the Board of the Halberg Foundation during the past year. I have deep transport, logistics and general commercial experience as outlined in the notice of meeting. This experience was gained over a long period of time, during which our operating environments range from good to extremely challenging and always highly competitive. At Air New Zealand, I sit on the Board's People, Remuneration and Diversity Committee, and I chair the Board's Health, Safety and Security Committee. The governance work of these companies is core to the airline strategy and its execution. The resilience shown by the Air New Zealand team as they have flexed the airline's operations to address the impacts of the Middle East crisis and engine availability issues while improving service performance has been commendable. The strategic reset to return the airline to profitability and to be able to deliver on our shareholders' expectations as my full support. I've now been on this Board for just over 6 years. The extensive knowledge I have gained of Air New Zealand's business its people and its many stakeholders. When combined with the experience I bring does, I believe, position me well with the appropriate attributes and experience to add value to the future performance of your company. As such, I ask for your support today to continue as a Director of Air New Zealand. Thank you.

[Foreign Language]. I move that Dean Bracewell is reelected as a Director of the company. Are there any questions from online participants?

No, there are not.

No questions have been received. So on your voting form under Resolution 1 to reelect Dean Bracewell, please tick the box either for, against or abstain. Thank you. [Voting]

Our next resolution is in relation to the reelection of Laurissa Cooney as a Director. Laurissa has been on the Board of Air New Zealand for around 7 years. She chairs our People and Remuneration and Diversity Committee and brings many strengths to the Air New Zealand Board including Living and regional New Zealand being a very significant and learned person around sustainability, which brings a lot of insights into the boardroom as well as being EV affiliates and a person who has been in CFO role and provides much financial -- many financial insights. I support the reelection of Laurissa and invite her to provide some comments in relation to her reelection. Thank you.

[Foreign Language] and I currently reside in the sunny Bay Plenty region. It is a pleasure to be able to address our shareholders today, and I thank you for your time. By way of background, I joined the Board in 2019. And given this will be my final term on the Board, I will work the Chair over the coming year to ensure that the timing of my retirement supports a smooth transition from the Board at the appropriate time. Over these years, I have developed a deep understanding of Air New Zealand, its history, its people, its customers, and importantly, the challenge and opportunities that come with operating in a constantly changing environment. I would value the opportunity to use this experience to help guide the company through its next chapter and to support the Board and management team and delivering on our future [indiscernible] strategy. I'm also proud to Chair the, People, Rem and Culture Committee. Strategy ultimately comes to life through people, having the right capability, leadership, culture, incentives, and the environment to enable our people to perform at their best. In addition to my extensive governance experience within New Zealand, I am also an Independent Director for listed entity, Goodman Property, Netherlands owned Rabobank and EQT-owned [indiscernible] and a steering committee member for the Institute of Directors Chapter Zero network. I'm active member of the Institute of Directors with a chartered member status and I'm a fellow of the Chartered Accountants Australia and New Zealand and previously held a Chief Financial Officer role. This has given me a strong grounding in financial reporting, audit, risk, and commercial decision-making. I would like to thank our passionate, talented and dedicated team for the work they are doing to build a strong, successful national airline that continues to connect New Zealanders to each other in the world. There is still a lot of hard work ahead of us in FY '27, but we are starting from a better place more aircraft are available, maintenance costs are coming down and the changes we have made across the airline will start to deliver more benefits. Fuel prices remain a challenge, but we have a stronger operation, a clear strategy and real momentum to build upon. I'm deeply committed to working on your behalf to achieve the best possible outcomes for your incredibly special company. Thank you for your time, [Foreign Language].

[Foreign Language] Laurissa. I move that Laurissa Cooney is reelected as a Director of the company. Are there any questions from online participants?

No, there are not.

Thank you. No questions have been received. So on your voting form under Resolution 2 to reelect Laurissa Cooney, please tick the box either for, against or abstain. Thank you. [Voting]

Our next resolution is in relation to the election of Rob McDonald as Director. I've already commented on Rob's candidacy as a Director of Air New Zealand earlier in my comments, but as a former CFO of New Zealand and now experienced governor, I believe he will add much value to our future strategy and support his election today. I will now invite Rob to give his comments in relation to his election.

Thank you, Dame Therese. [Foreign Language] Good afternoon, everyone. My name is Rob McDonald. It is a pleasure and a privilege to be standing for election to the Air New Zealand Board. Some of you will be aware of that long association with this company as an employee for over 25 years, including 14 years as Chief Financial Officer. During that time, I certainly experienced the ups and downs of the airline industry, perhaps best illustrated by the fact the U.S. dollar price of crude oil fluctuated between $10 and $145 over that period. I certainly had my share of industry and company crisis over that 25 years. We developed resilience in this challenging and complex but exciting industry. I have a great deal of empathy for the people at Air New Zealand over the covered years and ensuing engine availability challenges. . I left the airline a little more than 8 years ago to a bark on a governance career. I stepped down from the Board of Contact Energy last week, having been a director for the last 11 years and chair for the last 8 years. I'm the Chair of the Suncorp New Zealand companies and a Director of ASX-listed fleet partners. I'm also a Pro-chancellor of the University of Auckland. I'm very conscious, firstly, as a long-standing executive and secondly is an experienced director of the role of the Board and the role of management and the governance management boundary. In practice, that means respecting management's mandate to run the business day to day, while ensuring the Board -- ensuring the Board holds it robustly to account on strategy, risk and performance. It is an understatement to say that COVID and engine availability have not been kind to Air New Zealand. Further, the failure of successive governments to make -- have any meaningful economic regulation of airports is coming home to roost. The financial challenge in front of the company cannot be minimized. I believe I bring to the Board industry experience together with extensive accumulated senior executive and governance experience to confront these challenges. I am careful to organize my commitments to ensure I have the capacity to do full justice to a role at Air New Zealand. I fully understand the need for Air New Zealand to be financially sustainable. Air New Zealand is unique by world standards, it is unthinkable to imagine New Zealand without a national flag carrier, many countries around the world no longer have one. Air New Zealand needs to be successful for its customers, its employees, its shareholders and for New Zealand. But success is not preordained, -- it takes ambition hard work and bold decisions. I would be grateful for your support. Thank you for your consideration.

[Foreign Language] Rob. I move that Robert McDonald is elected as a Director of the company. Are there any questions from online participants.

No, they are not.

No questions have been received. Therefore, if I can direct you on your voting form under Resolution 3 to the item elect Robert McDonald, please tick the box either for, against or abstain. Thank you. [Voting]

Our next resolution is in relation to the election of Campbell Wilson as a Director. Again, I have made some earlier comments about Campbell's candidacy as a Director of New Zealand's Board. Campbell his whole career has been spent in aviation and much of it in senior roles leading lines in Asia. So I believe that he would add enormous value to Air New Zealand in that capacity and support his election. I will now invite Campbell to give his comments in relation to his election.

Thank you, Therese. [Foreign Language] My name is Campbell Wilson, Born and bred in Christchurch and a Canterbury University alumni. I have 30 years' experience in the aviation industry, the bulk of which was with Singapore Airlines, where I rose from a management trainee here in Auckland through various roles in the Singapore head office, including revenue management, network planning, sales and distribution as well as a number of leadership positions in Australia, Canada, Hong Kong and Japan. I ultimately became the first foreign recruit to be appointed to Singapore Airlines Senior Executive Committee. Of those 30 years in aviation, I've spent almost 12 as an airline CEO, 7 years as the founding CEO of Singapore Airlines low-cost airline Scoot, which together with a great team we took from an Excel spreadsheet to a fleet of nearly 70 aircraft operating from Singapore to Europe, Australia, China, Japan, there are many places between. Then 4.5 years as the CEO of Air India Group, following its privatization from a long period of government ownership. During this time, I've overseen comprehensive transformation of systems, processes, operations, workforce, fleet, product and customer experience, as well as the merger of 4 airlines and significant fleet and network expansion. The Air India group now comprises nearly 30,000 employees, a fleet of nearly 300 aircraft and add new revenues of around NZD 15 billion. Beyond executive roles, I have been on the Board of Directors of the International Air Transport Association or IATA; the Executive Committees of the Star Alliance and of the Association of Asia Pacific Airlines, as well as the boards of a number of full-service and low-cost airlines in Singapore, Thailand and India. As a long-term airline executive, I've navigated my fair share of impactful events ranging from the Asian financial crisis of the 90s to 911, the NCE collapse, SAS, the second Gulf war, the global financial crisis, COVID and its lingering effects on supply chains and of course, most recently, the multiple geographical conflicts and the significant effects on airspace and jet fuel prices. I'm acutely aware of the many critical roles airlines play. The Myriad stakeholders we serve, the responsibilities we carry and the high expectations placed in us. As a proud New Zealander, I'm very much aware of what Air New Zealand means to this country. And so the prospect of contributing to my national airline means a great deal to me. I look forward to the opportunity to serve on your board. Thank you.

[Foreign Language] Campbell. I move that Campbell Wilson is elected as a Director of the company. Are there any questions from unknown participants.

We have 1 question from Jordan Taylor. I ask is Campbell Wilson's performance at Air India being considered?

Yes, absolutely. As part of a normal process in relation to the appointment of any director and putting a director up for election, there is a due diligence process that is undertaken. It includes reference checking and a review of previous work. And that has been undertaken in relation to Campbell. He has strong experience in Asia, which was 1 of our key markets. And so we think his myriad of experience in Asia, including his time at India, but also in other airlines is going to be incredibly helpful to us moving forward. So yes, Campbell's experience has all been taken into account when we put them forward for election. Thank you. Are there any further questions?

No further questions have been received.

So I will ask you to turn to your voting form under Resolution 4 to elect Campbell Wilson, and please tick the box either for, against or abstain. Thank you. [Voting]

Have all here who wish to vote done so. Shareholders Participating via the virtual meeting website should now submit their votes through the MUFG online platform. Voting will be open until the close of the meeting. The results will be announced to the NZX and ASX after the conclusion of the meeting. I now welcome you to watch the following video before we proceed to general business. [Presentation]

Call the meeting back to order. As a reminder, the results of the poll will be made available on both the NZX and the ASX after the meeting. I would now like to open today's meeting up to any other questions you may have. Can I please just ask that we use this time to focus on questions relating to matters that are relevant to the airline. If you have any customer-related measures that you would like to address, please e-mail these to us at investors@airnz.co.nz while we wait for questions to come through online, I would address some of the questions we received prior to the meeting.

So the first question is in relation to the jet fuel price, which has been spiking. And just asking what levers the airline have to play with to ensure that I can mitigate any adverse impacts or minimize those adverse impacts. And I think as both Nikhil and I have discussed in our speeches today, there are a number of levers that can be pulled in relation to capacity in relation to fees in relation to making sure that we're controlling our own costs indirect as well as we possibly can. But I think there's no doubt that the elevated jet fuel prices are having an impact on our financial performance and our level of profitability. And at this stage, we are recovering circa a third of that price increase in fuel. And so we're going to keep working at that and there may be further reviews going forward in response to elevated fuel prices. There is another question that has come through. Why do you insist on paying bonuses when the company is losing money and shareholders are not receiving any dividends. If the company is not making profits don't lose more money by paying bonuses. And I just like to acknowledge the absence of dividends this year, and myself have a significant shareholding at Air New Zealand. And we do feel that very acutely. And we have a capital management framework by which we consider declaring dividends. But given the financial loss this year, we have elected not to pay an ordinary dividend in line with that framework. This year, the Board exercised at subscription to not pay any bonuses or what we would call short-term incentives. And this was in light of the company's financial performance, the constrained fiscal environment. and the elevated fuel prices that we've been discussing throughout the meeting and for the reason that you outlined, which is a need to maintain an alignment between remuneration outcomes for our staff and shareholder outcomes. Thank you. Are there any further questions, Julia?

We have a further question online. I have noted that the cabin crew on Air New Zealand flights do not appear in warm or welcoming as those of other airlines such as Air Canada. In addition, the seats are smaller than those of other airlines. All these factors are causing Air New Zealand's ranking to decline. When passengers have a choice to other airlines. I do notice that the ticket prices are low, but lower price does not necessarily attract passengers. Is that the quality of service that attracts people to choose an airline and how do we improve this?

Thank you for the question. Look, we monitor the views of our customers closely and regularly. And I'm really proud that our customer feedback and our customer standing has been improving over the last couple of years. And we're actually at a really high level today. I think though that's always a personal view, and I understand that perhaps that's your view. But the data that we have coming through to the Board would tell us that we're hitting in a really positive direction. And we're extremely proud of our cabin crew and the long tradition of unique Kiwi service. We often get feedback that when people bought in their New Zealand aircraft and meet our cabin crew how they feel like they're coming home or they feel that sense of home. And that's just part of our unique offering. We're always looking to fine-tune our service offering, and we've got a lot of refreshment of things coming forward, whether that be uniforms, menus, options to sleep, et cetera, there's a lot coming our way, which is pretty exciting moving forward. And some of you may have flown on our new aircraft, which have a new fish out inside, and we're working through our wide-body fleet, both 787s and CCCs to make sure the fleet is consistent in modern as part of our new product, which we believe is an excellent product. So thank you for the question. Are there any further questions? I can go to another one here. Just that our CEO recently spoke about our fleet status and just wondering when does the airline expect to have all of its airframes back in the year? And as I think we mentioned earlier in the meeting, we have significantly improved position. So -- we've gone from being somewhere between 0 to 1 in terms of wide bodies at the moment. I think today, we're at 0 aircraft on the ground widebodies or narrow bodies, A320, A321s we're at 1 today. And those are significant reductions on FY 2026. So a significant improvement, which we're really pleased about. Are there any further questions online?

We have a further question online. Air New Zealand has invested significant attention in capital and battery electric aircraft despite current batteries being unsuitable for most passenger operations. What ROIC does the Board expect with NZ now reliant on imported jet fuel, rising costs and geopolitical risk is sufficient focus being given to energy security, including domestic refining, larger strategic reserves or allied supply agreements that may not be reliable in a severe crisis.

Thank you for the question. I mean, I think, firstly to say that we have not invested significant capital and electric aircraft or demonstrator aircraft. We did complete a 4-month technology demonstrator program with beta technologies in 2026 but the objective of that trial was really to build our understanding of how these things might work, the operations, infrastructure, et cetera, that might be required. And it's important for our future decarbonization that we understand what's happening globally and what the options are that may be available to us over time. But we've completed that program, and we don't have any future plans in relation to the purchase or use of those aircraft as we stand today. But it's certainly something we understand a little bit now. Security of supply of jet fuel has certainly been a very topical issue given the Middle East crisis. Today, thankfully, supply feels reasonably secure, pricing is the issue that we are mostly consumed with. So as a result, we're in extremely close contact with the ecosystem in relation to fuel supply, including the government, the fuel suppliers themselves. And as I said, we're in a good position today, and we'll continue to keep that intensely under review. Thank you.

We have a further question online from Riki Manarangi. The NZ Shareholder Association notes that Robert McDonald served as Air New Zealand CFO for 13 years until 2017. Does the Board consider this political this a potential independence issue under the NZX Corporate Governance Code. And how has it satisfied itself that Robert remains independent?

Thank you for the question. The Board has considered Rob McDonald's independence and his determined that he is independent as a Director. I mean I'd just like to note that it's been close to a decade since Rob was involved in near New Zealand. And I think that's that sufficient time from our perspective to allow independent thinking to come into the boardroom. And also noting he's been involved with a number of other organizations in his governance career, which allow for further experiences and insights to be brought back to the Air New Zealand Board room. So we are comfortable with his status as an Independent Director. Thank you. I might move to another question that was put through, which is around the CEO introducing -- leading a strategic review to reset the business. And when shareholders can expect a concrete time line of specific targets out of that. Just like to say that Nikhil when he became the Chief Executive Officer, did run a very comprehensive process to reset the strategy, including thousands of Air New Zealanders that strategy has been endorsed by the Board. And when we think about what that means for us, it creates a lot of internal ambition. At the moment, we're really focused on this Middle East crisis issue. But we will be engaging in investors over time to give some more color to what you should expect to see as a result of that strategy being implemented. Thank you. Another online question?

Thank you. We have received another question from Riki Manarangi. The New Zealand Shareholder Association notes balance sheet comments made. However, more specifically, net debt-to-EBITDA rose to 3.8x, above the 1.5x to 2.5x target with Moody's outlook negative, capital commitments stand at $3 billion and no financial year 2027 guidance is provided. Can you outline specific actions that will restore investment-grade metrics and how these commitments will be funded without further equity raise or asset sales.

Thank you for the question. I'll just make a couple of quick comments, and then I'll hand over to our Chief Financial Officer, Kris Cudmore, to provide a little more color. But I think the key thing to note is that we do have an investment-grade rating as we stand here today. Obviously, our metrics have been impacted significantly by the decrease in EBITDA. and we've talked about that extensively Throughout the meeting how the Jet fuel crisis and other factors have impacted our profitability. Our net debt was relatively flat in the second half despite the impact of the fuel crisis on earnings. We're really focused now on what's coming up in terms of OpEx and CapEx and how we can improve our underlying earnings. So there's a real focus on the underlying business here and notwithstanding the impact of these fuel prices and just making sure that we're continuing to improve that. So Kris, perhaps you'd like to provide a little more color.

Thank you, Dame Therese. Dante. You've covered most of it as it happens. The key steps that we're going to take to move back within the sort of metrics that would be consistent with investment grade over the medium to long term are by taking down CapEx and we've put that in our annual results presentation, sort of a smoothing of CapEx and we're smoothing our aircraft deliveries as Nikhil and we're in negotiations on the exact timing of that with Boeing. The second piece is we're looking to increase our profitability very substantially over time, which is sort of the other part of that metric. And on top of the sort of actions and programs that Nikhil has talked about as we've promised investors, we're going to have a larger discussion of our future business improvements and what that looks like for the business in terms of KPIs and structural profit improvements over the next number of years. And we'll do that at an investor update later this financial year.

[Foreign Language] Thank you, Kris. I'll now move to another question that's being provided in advance Campbell Wilson, who leads India CEO is coming on board. I think that's big the question, will we be flying to India and/or Thailand. And in relation to both of those destinations, I can confirm that they are within the consideration set that we're looking at. We have always got a consideration set of long-haul routes that we're looking at. And when you think about the new aircraft that we are having delivered shortly and will come in over the next few years, it provides an opportunity to think about additional destinations. However, at the moment, we are focused on dealing with the fuel crisis. And so nothing is imminent, but there's certainly work to be done, and it continues to be under review. Thank you. The next question relates to the same topic. Any update, please, on the return to London, the wind and the Vier thanks. And I think the answer is very similar to the previous one, which is that we review our network regularly London remains within that consideration set. The latest activity that we've been doing around widebody services and launching new services has been from Christchurch. And Nikhil, our CEO announced earlier this year that we'll be commencing shortly services from Christchurch through to Perth, Singapore and Tokyo. So those just as our immediate focus dealing with the fuel crisis is also our immediate focus. So we're not looking to operate London anytime soon, but we will continue to review and optimize the network. Thank you.

Thank you. We have a further question online from Riki Manarangi representing New Zealand Shareholder Association. This is that they prefer a hybrid meeting, noting that 70% of NZX companies now hold these and shareholders view hybrid costs as a good cost. Given the airlines focused on rebuilding trust, will the Board commit to a hybrid ASM meeting in 2027.

Look, I think, we're all a fan of a hybrid meeting. And the reason is very specific for holding a virtual meeting only this time. And we will review that again next year. We understand the desire for a hybrid meeting, and we'll keep that under review. This is for a specific set of circumstances and I think there is both a cost and a focus issue in terms of time at the moment, but very keen to engage with our shareholders and looking forward to doing that again in the future. Thank you. Perhaps if I move to 1 of the other preprepared questions, which is around when will Air New Zealand start making healthy earnings again? And will it delay dividend payments for 3 to 4 years. And I think in relation to that question, I can't answer that right now. We have no guidance in the market at the moment. As Nikhil said earlier, 2 was expected to be a year of recoverability and entering back into profitability following our engine availability and aircraft on the ground issues. However, the fuel crisis has superseded that. We have not provided any guidance to the market at the moment. What I can tell you is that we are working to control what we can control in terms of our own costs within the business. We're continuing to advocate for some control around aviation ecosystem costs. And we are looking to manage the jet fuel crisis as well as possible. so we can return to profitability as soon as possible and allow for shareholder returns to commence. Okay. Any more questions online, please, Julia.

Yes, we have received 1 question from Ever Guilin directed to Mr. Bracewell. What are 3 issues stood out for you is the Health and Safety and Security Committee during the past year.

Thank you, Dean. I'll hand that question to you.

Thank you very much. The 3 issues. Well, firstly, 1 of them is probably not an issue, but -- the first thing that stood out the most is the strong and healthy safety culture within the airline. We test this from a governance level by engaging with our frontline workforce. We invite health and safety reps to the boardroom to sit in with her some meetings. We visit sites around the country and offshore and talk with local teams and our outsourced providers. And universally, the culture of safety first is very, very strong for this airline. So not an issue, but I think it's 1 of the most important features of health and safety within the airline. Another feature health and safety, which is not lost on us, is what's happening around the globe. Recently, we've had increased issues on air fields, if you like, with incidents, particularly in Sydney and over in the U.S. And so we've been watching those very closely. The third point I'd make is the increased weather incidents, the extreme weather that's happening around the globe. Our flood operations team do a very good job of monitoring with events, while our aircraft are in flight and communicating those with our pilots whilst in the year. But it is fair to say that whether turbulence and related weather issues is increasing. Thank you.

Thank you. I've got another question that was provided in advance, which is what is the true cost of full potential? And a full potential refers to our operating model and how we work. We introduced this a number of years ago, we're first-line in the world actually to introduce it. And we're seeing great improvements in terms of speed of delivery, working across the business rather than functionally. It is quite hard to put a true cost on that. All I would say is that there are significant benefits coming to the airline. And to me, that's the key thing is that those benefits are emerging and are flowing and it particularly has a significant impact in terms of the digitization of the airline and allowing digital resources to be allocated across tribes across the organization. So I think that's a summary of our full potential working model. Nikhil, was there anything you'd like to add to that?

Just that labor cost management has been 1 of the strong points of the airline as we've managed these multiple crises. So not only is the airline delivering a lot more capability as far as the underlying performance of the airline is concerned. We're also doing that with a lot less headcount. And recently, we have had to go through another round of restructure as 1 of the mitigating actions we've taken to deal with the fuel crisis. But the rate of change delivery across the airline has not slowed down. So we should take a lot of confidence from that.