Air New Zealand wants to explore routes to India - CEO Greg Foran

Air New Zealand chief executive Greg Foran says it wants to explore more routes to India - once it is through the tough economic "headwinds" buffeting the airline.

The national carrier had seen many passengers travelling to Singapore and then taking other airlines to India and it would like to explore more routes when it can.

On Thursday, the national carrier posted an underlying profit of $222 million in the year to June - a drop of more than half.

And the company's net profit for the financial year was down 65 percent to $146m, compared to $412m a year earlier.

Although the result was expected - in April, it downgraded its full-year earnings guidance - the airline did not anticipate profits to be flying high any time soon.

Air New Zealand chief executive Greg Foran told Checkpoint it was facing "a few headwinds".

"We came off a very, very good result last year - $585m - and that was reflective of revenge travel after Covid and this year - particularly in the second half - there's been a few headwinds that we have to deal with."

The first of those factors was the subdued New Zealand economy, which was being felt most keenly in government spending on domestic travel, he said.

"Government spend is down 28 percent - and that wouldn't be a surprise to anyone - and that generally represents about a fifth of our domestic business.

"Corporate and small-medium enterprises are also down, 10 to 12 percent."

Updating its fleet and engine availability was the second challenge, he said.

"It's just one of those things - you make decisions ... 20 years ago to run with a Rolls-Royce Trent engine and we've got some challenges [with supply].

"Today, I've got four Dreamliners that we've got engine issues with. We just can't get engines out of Rolls-Royce at the moment, and I've got six Airbuses that also we're waiting for engines out of Pratt & Whitney."

The third factor was tough competition in the American market, he said.

Traffic between China and US was running at only 25 percent capacity, which meant they had extra planes, and this had an impact on US carriers flying into New Zealand.

"We're still flying, and we've got people on our planes but not getting the revenue out of those particular routes that we'd done previously."

Foran said the airline expected the next six months to be similar but for profits to pick up after that.

So what routes were making money?

Foran said there had been "increased traffic across the board" as passengers from New Zealand flew into major American hubs such as Dallas, San Francisco and Los Angeles.

They were part of the Star Alliance with United, but this precluded them from doing deals with Delta and American Airlines, he said.

"The various authorities quite rightly want the thing to be competitive ... so you can cut your cloth in one area, but you can't everywhere."

Air NZ 'very interested' in India

In future, the airline was "very interested" in new routes into India, Foran said.

"We've got a lot of traffic heading there now that get on our Singapore flight, then ... they branch off and they could go to any number of cities in India."

Another option was "getting back into Europe", he said.

Any talk of expansion was moot, however, until the engine supply issue could be resolved, he said.

They were also hoping to see "a couple" of new planes from Boeing at the end of 2025.

"Once the ink is signed on those, then I'm more comfortable to start selling."

The airline was not looking to cut routes on its struggle American sector at the moment, he said.

"It's a pretty cyclical business; there are periods when you get tailwinds, and there are periods when you get headwinds and America is a good market for us.

"I think absolutely us pointing to America makes a lot of sense, and yes I'm very happy with New York."

On the question of over-priced fares, Foran said the average fare was down on a year ago.

"That's surprising, isn't it? People will say, 'Gee, I paid too much ... but the average is the average - and that's reflective of whether you're on domestic jet or a smaller turbo-prop plane."

Asked by Checkpoint host Anna Thomas whether it would bow to pressure to reduce fares over the school holidays, Foran blamed demand and supply.

"It's a bit like fresh strawberries - if supply is short, you're probably going to pay more for a product."

Air New Zealand recently pulled the plug on its 2030 climate targets, saying the resources needed to meet them were unaffordable and unavailable.

At the time, Foran said supply chain issues and expenses could slow the introduction of newer, more fuel efficient aircraft into the fleet.

The target was still under review, he told Checkpoint.

"We have to go back and reassess that. Our commitment to that is as strong - if not stronger - than it has ever been, [but] this is a very sensible governance decision."