Air Transport World

Kiwi revival: Air New Zealand is back from the abyss.(Company Profile)

As turnaround stories, Air New Zealand's is about as good as it gets. In just over 2-1/2 years under MD and CEO Ralph Norris, the company has come from the nightmare of writing off NZ$1.45 billion--the largest writeoff in New Zealand corporate history--to posting combined annual profits of NZ$331 million over its last two fiscal years. Although a 15% escalation in fuel costs and the adverse impact of an appreciating NZ dollar contributed to flat earnings of NZ$165.7 million for the year ended June 30, profit before unusual items and tax was up 10% to NZ$243 million on a 3.3% decline in revenues to NZ$3.5 billion.

It is an outcome few would have predicted when following the downfall of Ansett in September 2001, ANZ itself teetered on the edge of collapse as major shareholders Brierley International Ltd. and Singapore Airlines balked at recapitalizing the carrier. This prompted the NZ government to step in with an NZ$885 million injection in October 2001, thereby acquiring a controlling 82% stake. At the end of November, new board member John Palmer took over as chairman of the tottering concern. Norris, one of only two board members to survive the Ansett debacle, was appointed to his present posts in February 2002.

One of the first things on the agenda was a staff survey to gauge the airline's heartbeat. The results were disturbing, indicative of a desperate need for some "intensive care" to bring ANZ back to life. Only 29% of staff bothered to respond, and of those, 90% claimed that management was out of touch, possibly reflecting years of neglect under executives whose entire focus was shareholder return.

Norris's mantra is the opposite. "It is all about people," he insists. "The relationship between staff and customers is critical. If you get the staff relationship in good order, then you have a great opportunity to get superior satisfaction. If you get that, then you get superior shareholder returns."

But first he had to stop the flow of red ink, which had resulted ill net losses of NZ$319 million in FY02. His measures were harsh but effective: A 30% pay cut was imposed on management and all perks such as chauffeur-driven cars were dropped. Nonmanagement staff were asked to take a pay pause. …

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