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Air New Zealand AGIFORS 2003 New York

Air New Zealand AGIFORS 2003 New York. May 27th-30th 2003. Agenda. Introduction Update since Cancun - major airline activities Events up to August 01 September 01 Post September 01 NZ Express a winner Substantial improvement in NZ financial position

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Air New Zealand AGIFORS 2003 New York

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  1. Air New ZealandAGIFORS 2003New York May 27th-30th 2003

  2. Agenda • Introduction • Update since Cancun - major airline activities • Events up to August 01 • September 01 • Post September 01 • NZ Express a winner • Substantial improvement in NZ financial position • Optimisation tools assist in new crew contracts • NZ/QF commercial alliance • War in IRAQ and now the SARS virus

  3. Introduction • Started with Air New Zealand 5 and 1/2 years ago based in Auckland • Commenced as Finance Manager within Sales and Distribution responsible for finance and performance management analysis and reporting • Moved with my family to Melbourne, Australia in June 01 working for Ansett Australia in a similar Sales and Distribution performance management position • In June 02 joined the Air New Zealand Network Logistics team as Network Performance Manager responsible for the OR team, systems and standards and performance analysis and measurement

  4. Events at NZ since we last attended AGIFORS 2000 • June 2000 - NZ purchased final 50% of Ansett Australia to take 100% control • Oct/Nov 2000 - Combined AN/NZ announces a new business unit integrated structure • Jan 2001 - Garry Toomey appointed as the new President and CEO of AN/NZ • April 2001 - new “functional” structure announced to replace previously announced BU structure

  5. September 2001 • Undoubtedly one of the most significant months in history in NZ • Terrible events of 9/11 very much felt down under • AN collapses the following day (put into voluntary administration) • Major operational issues to be dealt with but well handled by a nucleus of key operational managers (about 10) and achieved thanks largely to the quality SABRE tools we had in place namely AIRCEWS and AIROPS • NZ had to write-off a large the significant investment in AN. NZ was on brink of financial with approximately 90% debt to equity ratio

  6. Later part of 2002 and 2003 - a significantly brighter period for NZ • Launch of NZ Express on 1st November 2001 • Announcement of substantially improved 31 Dec02 half year profit and year-end forecast • Re-negotiated tech crew (Dec02) and cabin crew (Mar03) contracts, both for 2 years • NZ/QF commercial alliance announcement

  7. An integrated product offering Full Service Value Based Plus Value Based

  8. Principles of NZ Express GIVING THE CUSTOMER WHAT THEY WANT • Lower fares, more choice • More seats per flight • Simplified booking and purchasing processes • Improved loyalty benefits for high yield frequent flyers

  9. Express Class a Success 20% savings in fares for customers Internet bookings averaging 35% (pre-launch 4%) PAX numbers up 30% on trunk routes 7% of customers using Kiosks - target is 50% Auckland Koru lounge upgrade completed

  10. Six months to Dec 02 Dec 01* Change $m $m $m Profit before unusuals & tax 138 (90) 228 Unusual Items (4) (330) (326) Profit before tax 134 (420) 554 Taxation (41) 44 (85) Net profit after tax 94 (375) 469 Return to profitability *continuing businesses only

  11. Traffic up 7.3 percent 2002 2001 RPK (millions)

  12. Load Factors up 6.9 percent 2002 2001

  13. Optimisation tools assist in crew contract negotiation process • Both NZ tech crew and cabin crew contacts expired in the later part of 2002 • Pairings and roster optimisers were both used to model different contract rule scenarios highlighting cost impacts of changes to high degree of accuracy • Introduced a new rostering system for pilots known as SBS (Seniority Biased System) • Moved to paying pilots using roster average whilst balancing pilot hours within a narrow window and allowing a minimal number of outliers +/- • Both pilot and cabin crew union negotiators directly engaged in reviewing OR models and data thereby gaining significant buy-in to the process

  14. NZ/QF Alliance - Approval Progress Kiwi Shareholder Approval ACCC and NZ Commerce Commission Shareholder Approval In Progress

  15. Latest events and Outlook • War in IRAQ did not have a major impact on NZ • The SARS is having a major impact • 8% of international capacity has been removed through to September03 • Monitoring impact very closely • No drastic cost reduction measures implemented yet!!!!! • Forward bookings softening - but loads remain relatively high • Full year profit forecast to 30 June 2003 still expected approximately PBUT $200 million, a $1.5billion turnaround from 2002

  16. AGIFORS 2004 As proud hosts of AGIFORS 2004, Air New Zealand extends an invitation to you all see you in NEW ZEALAND!!!!!!! AGIFORS March 2004

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