Business Hub: Air New Zealand’s Greg Foran says he’s in it for the long haul

A year ago Greg Foran was welcoming Air New Zealand’s rescue mission from Wuhan in China – a flight which signalled an upheaval in aviation was about to hit.

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 first started, and the airline is now flying just 5 per cent of its previous international network and is effectively a domestic carrier with international cargo links.

Covid-19 has devastated Air New Zealand’s financial position and later this year it will report another heavy loss for the past six months.

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

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

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

And that could take up to five years in a job he describes as a priviledge 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.”

Asked how long it could take to lead the Air New Zealand out of the pit it is in he said: “You don’t really make any progress in these jobs unless you’re in it for four to five years.”

Dealing with the public

Air New Zealand 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 Air New Zealand job.

The government regards Air New Zealand as too important to fail but retains its arms-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) was 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.”

He said dealing with the government was easier given that the airline’s goals were the same – connecting New Zealanders 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.”

The heart-wrenching calls

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 on short-term contracts last month 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 around 4000 staff, in what Foran says were some of the hardest decisions he’s ever had to make.

“It’s significant to lose over a third of your workforce, but also appreciate that over two thirds of 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’s wage subsidy the airline claimed was equivalent to about 13 weeks’ payroll for the airline.

He said rebuilding a good relationship with staff was a priority this year.

This would involve “over-communicating” and being available to staff at all times.

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

“We’ve only seen Greg Foran in the context of the redundancies and the pandemic. As we start to rebuild he 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,” said E tū’s aviation head, Savage.

Foran, members of the Board and some of the much changed executive team (which has been reduced in size by 30 per cent since this time last year) have taken a 15 per cent reduction on their base salary since March 2020.

This, added to the non-pay out of their short- and long-term incentives, effectively translates to a 40 per cent to 50 per cent reduction of overall annual remuneration.

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

Close to home

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

He says changes loom for the domestic operation.

Without international visitors on domestic flights, it makes up about 25 per cent of what was pre-pandemic a business with $6 billion in revenue.

“One of the things that a crisis like this does is it provides you an opportunity to really rethink about how you do it,” he says.

“Clearly we’ve still got a responsibility to get a return on invested capital so it’s not just a matter ofdropping the prices on everything and saying ‘I don’t need to worry about getting a return on people’s investment’. But I think there is an opportunity for us to rethink about some of the products, and how we do things.”

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.”

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