Air NZ 2023 Annual Meeting Materials

Stock exchange listings: New Zealand (NZX: AIR) / Australia (ASX: AIZ) / ADR (OTC: ANZLY)


MARKET ANNOUNCEMENT

Air New Zealand postal address: Private Bag 92007, Auckland, 1142, New Zealand
Investor Relations email: investor@airnz.co.nz
Investor website: www.airnewzealand.co.nz/investor


26 September 2023

Air New Zealand 2023 Annual Shareholders’ Meeting Materials


Please find attached to this announcement the Chairman and CEO address, in addition
to the presentation for Air New Zealand’s 2023 Annual Shareholders’ Meeting which
will be held today at 2pm.

There is no new material information contained within the speeches or the
presentation.

Information on meeting participation is included in the Notice of Meeting. Shareholders
attending online will be able to access the meeting link and Portal Guide from the
Company’s website, https://www.airnewzealand.co.nz/annual-meeting.


Ends.



Jennifer Page
General Counsel & Company Secretary
jennifer.page@airnz.co.nz
+64 27 909 0691

For investor relations questions, please contact:
Kim Cootes
Head of Investor Relations
kim.cootes@airnz.co.nz
+64 27 297 0244

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AIR NEW ZEALAND 2023 ANNUAL SHAREHOLDER MEETING
ALL INFORMATION IS PRIVATE AND CONFIDENTIAL
ANNUAL
SHAREHOLDER
MEETING
26 September 2023
NZX: AIR | ASX: AIZ | US OTC: ANZFY

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AIR NEW ZEALAND 2023 ANNUAL SHAREHOLDER MEETING
Dame Therese Walsh
CHAIR
Larry De Shon
DIRECTOR
Claudia Batten
DIRECTOR
Alison Gerry
DIRECTOR
Dean Bracewell
DIRECTOR
Paul Goulter
DIRECTOR
Laurissa Cooney
DIRECTOR
Jonathan Mason
DIRECTOR
OUR BOARD OF DIRECTORS

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ONLINE ASSISTANCE

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• Chair’s address
• CEO’s address
• Questions on 2023 performance
• Resolutions and voting
• General Q&A session
ORDER OF MEETING

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Dame Therese Walsh
CHAIR
CHAIR’S
ADDRESS

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Operating revenue of
$
6.3
billion
Earnings before taxation of
$
574
million
Fully imputed special dividend of
6.0
cents per share
A STRONG 2023 RESULT
DELIVERED IN THE CONTEXT OF AN EXTRAORDINARY OPERATING ENVIRONMENT

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Welcomed to the Air New Zealand
whānau
3k people
Employer of the year
2
#1
Welcomed to the Domestic network
3 new A321’s
Collective agreements settled
with the unions
16
Mission Next Gen Aircraft
Launched
Returned to shareholders
$200m
KEY HIGHLIGHTS OF OUR RECOVERY YEAR
WITH MUCH TO BE PROUD OF BEYOND THE STRONG FINANCIAL RESULT
Corporate reputation for
ninth consecutive year
1
#1
Of our frontline staff
Lifted wages
Top Cabin Concept winner
3
Skynest
1Kantar Corporate Reputation Index 2023
2Ranstad 2023
3Top Cabin Concept 2023 at the Crystal Cabin Awards

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Levers we control
Levers that rely on collaboration with
industry and policy makers
Operational
efficiency
Continued
fleet renewal
SAF
Next
generation
aircraft
Carbon
removal
solutions
DECARBONISATION REMAINS OUR BIGGEST CHALLENGE
BUT WE ARE LEANING INTO THIS AND HAVE SET AMBITIOUS TARGETS

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Invest in core operations
Maintain financial resilience and flexibility
DistributionsGrowth capex
Underpinned by our commitment to maintain investment grade credit rating metrics
• Target liquidity range of $1.2 billion to $1.5 billion
• Net Debt to EBITDA ratio of 1.5x to 2.5x
• Fleet and infrastructure investments above WACC through the cycle
• Investment to support the airline’s decarbonisation ambitions
• Ordinary dividend pay-out ratio of 40% to 70% of
underlying net profit after tax (NPAT)
• Return excess capital via special dividends or
share buybacks
• Disciplined investment in value accretive capex
• Target ROIC above pre-tax WACC
REVISED CAPITAL MANAGEMENT FRAMEWORK
EFFECTIVE FROM FY24, WITH PRUDENT MANAGEMENT BACK TOWARD TARGET RANGES

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UPDATED COMMENTARY ON FY24 OUTLOOK
•The airline notes that the 2023 financial year was particularly unique with significant customer demand,
constrained market capacity and lower fuel prices in the second half, and as such, we believe the 2024 financial
year will be more reflective of future financial performance.
•Looking ahead to the first half of the 2024 financial year, customer demand remains solid across most of our
markets, noting that in recent weeks we have seen softening in corporate and domestic demand. We are mindful
of the uncertain economic environment however and acknowledge there are a number of factors that may impact
future customer demand and profitability. These factors include increased international competition, volatile fuel
prices, a weaker New Zealand dollar, ongoing wage inflation and increased airport charges.
•Since the annual result reported on 24 August, the airline also notes a further adverse impact on its cost base
from fuel prices and the weaker New Zealand dollar. These factors, alongside passenger demand and the
previously disclosed Pratt & Whitney global engine issues will continue to be closely monitored.
•Given the ongoing uncertainty and volatility of these macroeconomic factors, the airline will not be providing
guidance at this time.

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Greg Foran
CEO
CEO’S
ADDRESS

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DRIVING VALUE FOR ALL STAKEHOLDERS
BALANCING VARIOUS INTERESTS OVER TIME TO ACHIEVE OUR FULL POTENTIAL
Our People
Our Shareholders
Our Customers
Our Suppliers
Our Communities

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At 77% for the year despite
floods etc
EASING
CUSTOMER PAIN POINTS HAS BEEN A KEY PRIORITY
AND WE HAVE TAKEN MULTIPLE ACTIONS TO ADDRESS THESE CHALLENGES
Customer
satisfaction
(out of 100)
Mishandled
bags
(per 1,000 bags)
On time
performance
Contact Centre
wait times
(mins)
CSAT levels back at
pre-Covid levels
Down over 30%, to <4 bags p/1000,
better than industry average
OTP back near pre-Covid
levels
Average wait time ~6
minutes, down 75%
77%
83
3.5
6.3

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Optimised
International network
with deep alliance
partnerships
Strong brand &
service culture
Airpoints
TM
loyalty
programme
Modern fuel-
efficient fleet &
infrastructure
investments
Resilient core
Domestic
business
SUSTAINING PERFORMANCE IN THE FACE OF HEADWINDS
OUR COMPETITIVE ADVANTAGES POSITION US WELL TO FACE VARIOUS CHALLENGES

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Profitably grow and enhance
our iconic domestic offering,
providing New Zealanders with
even more choice as the best-
connected country in the world
Connecting New Zealanders
and our exports to the world
through an optimal international
network and premium
leisure product
Increase products and benefits
members value from our
Airpoints
TM
programme,
supercharging the loyalty
ecosystem for the airline
OUR STRATEGIC ROADMAP CONTINUES TO GUIDE US
Grow
domestic
Optimise
international
Lift
loyalty
Operational excellence that
provides a seamless travel
experience for our customers –
do it right, first time, every time
Brilliant
Basics
Committed to meaningful action
to reduce our carbon impact
Serious about
Sustainability
Technology focused on delivering
a world-class experience for our
people and customers while
driving efficiencies
Digital
Dexterity
Putting people, health and
safety first
Prioritising
People & Safety
Profit drivers
Enabled by strong culture and focused investment
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Unveiling new products and
services for customers
[Loyatly]
Flying the right aircraft to the
right places
Investments in the contact centre
Advancement of self-service
capabilities
Progressing our decarbonisation
road map
RELENTLESS FOCUS ON THE FUTURE
xxxxxxxxxxxxxxx
QUESTIONS ON FY23 PERFORMANCE

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RESOLUTIONS FOR VOTING
• Resolution 1: To re-elect Dean Bracewell
• Resolution 2: To re-elect Laurissa Cooney
• Resolution 3: To re-elect Larry De Shon

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Dean Bracewell
DIRECTOR
TO RE-ELECT
RESOLUTION
1

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LaurissaCooney
DIRECTOR
TO RE-ELECT
RESOLUTION
2
1.

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Larry De Shon
DIRECTOR
TO RE-ELECT
RESOLUTION
3
1.

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GENERAL QUESTIONS

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ANNUAL SHAREHOLDERS’ MEETING
TUESDAY 26 SEPTEMBER 2023

CHAIRMAN’S ADDRESS

Tēnā koutou katoa.

The 2023 financial year began as borders were still reopening and many of our international
widebody aircraft remained stored in the desert. Fast forward twelve months to the end of our
financial year in June, and the airline had restored around 80 percent of its pre-Covid capacity, re-
opened all international ports and returned to profitability.

The financial result we announced a little over a month ago, with operating revenue of $6.3 billion
and statutory earnings before taxation of $574 million, was delivered in the context of what can only
be described as an extraordinary operating environment.

Since New Zealand’s borders reopened, the level of demand we have seen both here at home and
on our international network has been much stronger than even our most optimistic forecast
anticipated when we recapitalised the business. Those levels of demand persisted throughout the
financial year.

That strong demand environment coincided with a perfect storm of supply constraints across the
whole aviation ecosystem – from a tight labour market and increased levels of sickness, to delays
in the supply of new aircraft and spare parts. The pressures of ramping up quickly have been felt
in almost every facet of our operation, and it has been the same for all airlines globally.

Combine these dynamics with inflationary pressures that have seen cost increases of around 15 to
20 percent across key areas of our business, and you quickly arrive at the environment we see
today, both here in New Zealand and across the global aviation sector - tight supply and high-cost
inflation driving higher prices for customers and at times a clunky experience.

We know in a tight supply, high demand environment, there is a fine balance to tread between
offering affordable fares and making sure there are seats available for those customers that need
to travel last minute. Aotearoa New Zealand is our home market, a market we care deeply about,
and we have worked hard to tread this balance carefully, putting as many aircraft and seats in the
air as we could to help alleviate prices.

2

We are pleased with the result Air New Zealand has delivered, and of the value we have created
for our shareholders. After three years of pandemic related losses, it felt good to return to
profitability. This has allowed us to announce a special dividend of 6.0 cents per share, returning
more than $200 million dollars to our shareholders, as well as make strategic investments in the
airline’s future.

Reflecting on the past three years, I feel proud that despite the challenges, Air New Zealand kept
its eyes firmly set on the future. It would have been easy to let short-term decision-making creep
in, but we kept our purpose – to connect New Zealanders to each other and the world, our promise
of manaaki – taking care further than any other airline in the world, and our Kia Mau strategy, front
of mind in everything we did.

And there is so much more to our recovery than just the financial result. Our people have worked
tirelessly to deliver great achievements, some of which are outlined on this slide.

I'm only going to highlight a few, but we have undertaken the largest recruitment drive in our history,
onboarding and training 3,000 people in a tight labour market. We’ve lifted the wages across our
frontline work force to a minimum of $30 per hour as part of our Good Jobs strategy, and settled 16
collective agreements with our unions, which speaks to the collaborative nature of our relationship.

I would like to take this opportunity to acknowledge that none of this would have been possible
without our remarkable team of Air New Zealanders, who turn up each and every day to deliver for
our customers. They are the very backbone of the airline and their grit, commitment, and
determination to deliver exceptional service is second to none. The Board and I are very grateful
for everything they do.

Sustainability, or more specifically, decarbonisation, continues to be one of our most critical
challenges and the profound impact of the changing climate was felt here in New Zealand with the
Auckland floods in January and Cyclone Gabrielle a few weeks later.

The future of our industry depends on the global transition to net zero emissions by 2050 and we
must all be invested in this transition. Air New Zealand has its part to play, and we know we must
decarbonise our operations.

But the challenges are significant. Aviation is one of the hardest sectors to abate, there are very
few levers available, and we don't control all of those levers.

3

While we can deliver greater operational efficiency, other pathways to decarbonisation, such as
sustainable aviation fuel and next generation aircraft, will require global collaboration, policy change
and significant advances in technology.

We are not waiting for a solution to come to us. Over the past year, Air New Zealand has worked
with local and global stakeholders to start accelerating access to high quality, affordable sustainable
aviation fuel. We have also partnered with aircraft developers and innovators to give them
confidence we will be an early adopter of new lower emissions aircraft. We want – and need – a
seat at the global table as all airlines grapple with the need to decarbonise and dramatically reduce
emissions.

We know the task ahead is immense, but we are moving in the right direction.

One thing the Board has been deeply involved in this year is the revised capital management
framework announced at the annual results in August. The Board determined it was appropriate to
revisit the airline's previous capital management settings around liquidity, leverage, investment
targets, and distributions following the recovery from Covid. The revised framework is applicable
from the 2024 financial year.

We have increased our target liquidity range, which was $700 million to $1 billion, to be $1.2 billion
to $1.5 billion. This is currently supplemented with the existing $400 million Crown Standby Facility,
which is undrawn.

We remain committed to maintaining an investment grade credit rating. We are currently rated Baa2
by Moody's and it is the Board's intention to maintain this rating, as it provides financial resilience
and flexibility in terms of access to various funding markets and attractive pricing.

Given the importance of this rating, we are moving away from reporting a gearing target of 45% to
55% to implementing a net debt to EBITDA target metric of 1.5 to 2.5 times. This better reflects
how our lenders, credit agencies, and investors assess our financial leverage.

Our distribution policy has been revised from a consistent and sustainable ordinary dividend to a
payout ratio of 40% to 70% of underlying net profit after tax, which is more aligned to global peers.
As always, distributions are ultimately determined by the Board, taking into account profitability,
where we are at in the capex cycle, and other macroeconomic factors.

We acknowledge we are currently outside our target ranges, but there are a number of tools that
will be used to prudently transition these back into range over time.

4

At the results in August, we noted that the 2023 financial year was particularly unique, with
significant customer demand, constrained market capacity, and lower overall fuel prices in the
second half. As such, we view the 2024 financial year to be more reflective of future financial
performance.

Looking ahead to the first half of the 2024 financial year, customer demand remains solid across
most of our markets, noting that in recent weeks we have seen softening in corporate and domestic
demand. We are mindful of the uncertain economic environment however and acknowledge there
are a number of factors that may impact future customer demand and profitability.

These include increased international competition, volatile fuel prices, a weaker New Zealand
dollar, ongoing wage inflation, and increased airport charges.

Since the annual result reported on 24 August, the airline notes a further adverse impact on its cost
base from fuel prices and the weaker New Zealand dollar. These factors, alongside passenger
demand and the previously disclosed Pratt & Whitney global engine issues, will continue to be
closely monitored.

Giv en the uncertainty and volatility of some of these macroeconomic factors, the airline will not be
providing guidance at this time.

To finish, I am enormously proud of how Air New Zealand has navigated the past year. Despite the
challenges of restoring our international network and navigating a global aviation sector that has
struggled with the speed of the recovery, I believe Air New Zealand has delivered for all of our
stakeholders. This is testament to the strong leadership and customer centric ethos that has been
embedded throughout the organisation. On behalf of the Board, I would like to thank the entire Air
New Zealand whanau for their tireless efforts. I would also like to thank my fellow directors, and
you, our shareholders – for your support.

Ehara taku toa i te toa takitahi engari he toa takitini.

CHIEF EXECUTIVE OFFICER’S ADDRESS

Kia ora and good afternoon everyone.
While the recovery has been challenging to navigate, our guiding principle has been to do the right
thing - by our customers, our people, our shareholders, the communities we fly to, and our suppliers.
And we think we’ve struck the right balance in terms of rebuilding the airline, reinvesting in the
future and delivering the Air New Zealand experience our customers expect.

5


Reflecting on the past year, it's remarkable to think that we've gone from reporting one of our worst
financial performances ever to announcing a strong return to profitability in 2023.

In between times we’ve ramped up our international network at pace, hired and trained thousands
of staff, launched direct flights to New York and developed a roadmap to guide our progress on
decarbonisation through to the end of the decade.

We’ve announced a new cabin layout for our wide body aircraft coming in late 2024, including the
world's first Skynest providing a lie flat option in economy. We’ve invested in self-service digital
tools that put more power in the customer’s hand while helping us remove five weeks’ worth of call
volumes from our contact centre.

We supported our communities, deploying assistance flights, carrying communication support,
emergency supplies and airport operational staff to help those on the ground in the aftermath of
Cyclone Gabrielle, and we reduced fares to support those travelling to or from the impacted regions.

We also recognised suppliers at our annual Tūhono Supplier Awards, acknowledging the significant
contribution they make to our operations, and the value that can be achieved through deep
partnership and engagement.

Delivering brilliant basics for our customers has been a key focus, and we’ve lifted on-time
performance from 68% in July 2022 when the first international ports reopened, to an average of
77% for FY23, and up at 82% in July and 83% in August this year. It may not feel like it at times,
but that performance puts us in the Top 5 of major airlines worldwide, but we know we have more
to do, especially around cancellations.

We’ve staffed up in key areas to ease pain points for customers, adding resource to the contact
centre and our refunds teams to work through backlogs.

And we’ve extended the deadline for customers to use their Covid credits several times, while also
enabling those credits to be used on any flight, on any part of our network. Customers can also use
the credits to book flights for others or use them for various upgrades. Currently we have just over
$200 million of these Covid related credits on our balance sheet, as around 80% of credits issued
throughout Covid have already been utilised by our customers. We are busy reminding those with
outstanding credits to make a booking by 31 January 2024 for travel by 31 December 2024.

6

I think the whole team at Air New Zealand would agree that it has been incredibly rewarding to get
back to doing what we love, flying kiwis to reconnect with friends and family both near and far, or
to take that long awaited holiday. But it has certainly stretched us operationally at times.

At the interim results we spoke candidly about the challenges we faced with contact centre wait
times, the reliability of our schedule, mishandled baggage and the time taken to process refunds.
As you can see, we have made some very real progress in each of these areas, and maintaining
this momentum through FY24 is a priority.

Reflecting on the journey we have been on, if Act I was “Survive Covid” and Act II was “Enjoy the
Recovery”, then Act III is to “Sustain performance against Headwinds”.

Although we have been experiencing a strong trading environment due to high levels of demand
and industry wide supply constraints, we are facing an uncertain macroeconomic environment.

Market capacity from North America will increase over 120% this summer with American carriers
and Qantas adding new services. In Asia, we're starting to see Chinese carriers add services from
various ports. While more capacity is a good thing for markets that are currently undersupplied, the
increasing cost of living may start to impact discretionary spend and with it, people's travel plans.

Although we reported our annual results only four weeks ago, fuel prices have risen substantially
higher, and the cost to purchase that fuel in USD is even more expensive due to the weaker New
Zealand dollar. Inflation continues to bite, driving increased costs across the whole business.

Recent updates provided by Pratt and Whitney, who supply and maintain engines on 16 of our NEO
aircraft which operate primarily on the Tasman and Pacific Islands, will put further pressure our
operation. We expect more details from Pratt & Whitney in the coming weeks and have been
developing plans to reduce the potential disruption to customers.

As we navigate our way through these challenges, I'm confident we are well positioned as an airline,
have the right strategy and a core set of enduring competitive advantages that we have spent years
cultivating and fortifying.

These advantages will support us through difficult periods, and when times are good they really
help power up our performance. We also have a flight path, our Kia Mau strategy, that helps us
navigate short term volatility and keeps us future focussed.

7

That strategy - Kia Mau - focuses on three key drivers of profitability. First is to prudently grow our
domestic network, the core of our airline. The second is to optimise our international network, which
means flying the right aircraft to the right locations at the right times for our customers. And third is
to lift our loyalty proposition, which helps drive deep connection and engagement with our airline.

Underlying these pillars are four key enablers - doing the basics brilliantly, leaning into our
decarbonisation challenges, improving the digital proposition for our customers and our people, and
having a relentless focus on safety.

With Kia Mau at the heart, we are rebuilding as a stronger, more nimble airline. And we’re confident
we have the right strategy and the right team to deliver.

Tēnā koutou, tēnā koutou, tēnā koutou katoa.