Distinguished guests gathered here today, my name is Theo Te Ariki Raukawa . It is my privilege and honor to welcome you all to Air New Zealand's annual shareholders meeting. I share with you our Māori culture with grace and dignity. Welcome, one and all. I pay homage to our Māori king, Kingi Tuheitia, Lady Atawhai and their family, and more so as our king attended Queen Elizabeth's funeral in England on behalf of all Māori and all New Zealanders. It is mperative that I also pay homage to our local people and tribe of this particular area. Ngāti Whātua, I acknowledge you. Now to the housekeeping. In the unlikely event of an emergency, please follow the instructions of the venue staff. Exits are located at each end of the rooms. Should you require mobility assistance, please remain where you are and someone will come to assist you.
Bathrooms are located to your left. This is a non-smoking building. Kia ora.
Kia ora.
Your love lifted me higher Than I've ever been lifted before So keep it up, quench my desire And I'll be at your side forevermore You know your love Keep on liftin' me Higher, higher than higher You know your love Keep on liftin' me Higher than higher Higher You know your love Keep on liftin' me Higher than higher
Tena koutou katoa. E hoa ma, nau mai, haere mai. He tino mihi ki a koutou rangatira ma me te whanau o Air New Zealand, aroaro rangi. Ko te tumanako ma te whakawhiti whakaaro ka whai hua tenei hui. Ko Therese Walsh taku ingoa. Ko ahau te tiamana o Air New Zealand aroaro rangi. Good afternoon, everyone, and welcome to Air New Zealand's annual shareholder meeting for 2022. My name is Therese Walsh, and I'm the chair of the Air New Zealand board. Today's meeting is our first hybrid shareholder meeting since 2019, and we're just so pleased to be able to be here with those of you that are here with us today in person. This meeting is also being webcast live for the benefit of those unable to be here with us.
Part of our commitment to shareholders is making our meetings as accessible as possible, regardless of the physical location. We hope that holding a hybrid meeting will continue to support greater participation and engagement among our shareholders. On behalf of the board and the executive team, I would like to extend a very warm welcome to everyone. Before we begin our formal proceedings today, I would like to introduce you to my fellow Air New Zealand board directors who are seated here in front of you. From my far right, we have Claudia Batten, Jonathan Mason, and Alison Gerry. From my far left, we have Paul Goulter, Laurissa Cooney, Dean Bracewell, and of course our CEO, Greg Foran. Joining us virtually today, we also have Larry De Shon, who is one of our directors based in Florida in the USA.
Seated in the front row and assisting us today with the meeting are Richard Thomson, our Chief Financial Officer, our general counsel, Jennifer Page, James Gibson from Bell Gully, our company's lawyers, and Melissa Collier from Deloitte, the company's auditors on behalf of the Auditor-General. We also have the rest of the executive team here with us in the front row, and we also have our share registrar, Link Market Services, present today. I would like to take a minute before we begin to acknowledge and thank you, our shareholders, for your continued support, both over the course of the pandemic, but also more recently in May when we recapitalized the airline. We are very grateful to you for your support. We all know that COVID-19 has had a profound impact on the airline.
While we've turned a massive corner in our recovery since the borders reopened, New Zealand's borders reopened, we know it's been a tough two and a half years for our shareholders. We acknowledge that. We want you to know that we are committed to rebuilding an airline that is stronger than ever before and to return to profitability. Every day, Air New Zealanders across the business are showing up and putting their best foot forward to move us towards this future. Every decision we make is with our customers, our people, and our shareholders in mind. Let's turn now to the formalities of the meeting. I note, based on the information conveyed to me, that there is a quorum of shareholders present, and therefore, I declare the meeting officially open. Notice of the meeting was circulated to all shareholders, and I will therefore take it as read.
We will discuss the resolutions later in the meeting, so we'll come to those. Please note that only shareholders, proxy holders, or shareholder company representatives may vote. For those of you who are joining us online, you will be able to vote and ask questions during the meeting. Please refer to the virtual annual meeting online portal guide. That's available on both the NZX and our investor center website for specific instructions. If, though, during the course of the meeting you need any further assistance, please call the Link Market Services helpline on the 0800 number highlighted on this slide. Right, so on to the order of events for today's meeting, and they will be as follows.
I will start by discussing the financial performance for the 2022 financial year, and also our outlook for the first half of the financial year 2023. Following my address, we will hear from Greg Foran, our Chief Executive Officer, and he's going to discuss our strategic priorities and the great work that has been undertaken to make sure the airline builds back stronger than ever. There will then be an opportunity for you to ask questions related, and at that time, specifically related to our 2022 financial performance. Following that, you'll hear from several of my fellow directors who chair our various board committees. Dean Bracewell will speak about the great work our Health, Safety, and Security Committee has been doing throughout the year to keep our customers and our people safe.
Alison Gerry will discuss the key role the Audit and Risk Committee plays in ensuring the airline is appropriately managing compliance and risk. Finally, you'll hear from Jonathan Mason, who will talk about the work our People, Remuneration, and Diversity Committee has done to ensure we look after our people, we compensate them fairly, and create a diverse and inclusive work environment. I will then move on to our formal resolutions contained in the notice of meeting. Voting on those resolutions will be conducted by way of poll. For those of you here with us in Auckland today, you will be able to cast your vote by filling out the form that you brought with you or that you received at the registration desk on your way in. That can be, they can be collected at the end of the meeting.
If you are a shareholder and did not register on arrival and you wish to vote, please make your way to the registration desk at the back of the room, and the staff from Link Market Services will assist you. For those of you attending the meeting online, you'll be able to cast your vote using the electronic voting card that you will have received when you validated your registration. Again, if you have any issues, please refer to the virtual annual meeting online portal guide that was sent to shareholders, and it can also be found on the main page of our Investor Center website. Following the voting, I'll open the floor to any general questions you may have of myself, Greg, and the board.
Those of you present at the meeting will be able to ask questions, as well as those participating online and will be using the virtual investor website for that purpose. When I call for questions, can shareholders present in the room please wait until a microphone is provided to you and clearly state your name before asking the question. Thank you. I will take questions from those present in person first before moving on to any questions from shareholders online. We've also received some questions from shareholders prior to the meeting, and we'll address those during the session also. Immediately after the conclusion of the meeting, we invite shareholders who are attending in person this afternoon to join us, the board, members of our executive team, for some refreshments.
2022 has been another year of significant highs and lows for Air New Zealand. Restarting the airline at scale has been no easy feat, but it is clear that 2022 marks the start, the true start of our recovery. With a NZD 2.2 billion recapitalization complete and New Zealand's borders now open to the world, we are firmly in the Revive phase, and it's an exciting place to be. We're back flying to most of our international ports and have welcomed thousands of visitors to Aotearoa. We're currently completing the biggest recruitment drive in the airline's history to respond to what can only be described as a very strong demand environment.
We've reanimated four of our seven Boeing triple seven-three hundred aircraft, which were stored in the desert over the course of the pandemic, and have reopened international lounges and reinstated offshore sales offices. Late last week, we launched our flagship service to New York, and it was a real privilege to join Greg and the team, along with our key tourism and travel partners, on that first flight out on the seventeenth of September. North America plays a key role in optimizing our international network, and it was fantastic to see this much-anticipated route get up and running. While there is no denying that there's still uncertainty ahead and some challenging macroeconomic conditions, we're just thrilled to see that desire for travel and the desire for the connection that comes from travel remaining so strong.
What has become increasingly clear to us as we move into the recovery and the revive phase is that in a post-COVID era of flying, we cannot simply return to doing what we have always done. The world has changed so much since the pandemic began, and we are making sure that the airline changes with it. Our Kia Mau strategy keeps us focused on what we need to do, grow domestic, optimize international, lift loyalty, and Greg will provide further insights on this during his address later today. I'll now move us on to the 2022 financial results. We are delighted that demand has returned strongly. As you'll see on the chart in my next slide, we are not currently seeing signs of that demand waning.
However, the reality is that a number of our key financial and operational metrics were significantly impacted by COVID-19 restrictions throughout the majority of the 2022 financial year. For FY22, we reported operating revenue of NZD 2.7 billion, and our overall result was a loss before other significant items and taxation of NZD 725 million. We reported a statutory loss before taxation of NZD 810 million. The emergence of the Delta variant in New Zealand and the resulting 100-day-plus lockdown meant that between August and November 2021, which is a significant chunk of the financial year, our operations were severely restricted. We then had to contend with Omicron impacting the domestic network in the second half of the financial year, all while international borders remained largely closed.
This, combined with record high fuel prices, inflationary pressures on the cost base, and costs associated with building back our operations, contributed to the financial loss for the year. Cargo was a major contributor to revenues, delivering NZD 1 billion, and this was due to flying under New Zealand and Australian government air freight schemes, which contributed NZD 403 million, as well as heightened seasonal demand and wide-body flying. We expect this level of cargo revenue to moderate from here on in as the recovery continues, with the Australian scheme now finished and the New Zealand support scheme starting to taper off. However, cargo continues to be an important part of our strategy of optimizing international profitability.
From a liquidity perspective, as at 20 September 2022, the airline has available liquidity of NZD 2.4 billion, consisting of approximately NZD 2 billion in cash and NZD 400 million of available funds on the unsecured standby loan facility with the Crown. It's worth noting that the cash balance includes NZD 200 million of redeemable shares on issue to the Crown, which is treated as debt on our balance sheet. Cash is currently at elevated levels, substantially above our minimum target for liquidity of NZD 700 million, and that's as a direct result of the timing of cash receipts from the recent capital raise, as well as strong revenue in advance from the high levels of demand that we're currently observing.
We do expect this level of cash will reduce in the coming months as the sales are availed and as we make payments for planned aircraft and non-aircraft expenditure. We will also look to repay the NZD 200 million of redeemable shares on issue to the Crown as our recovery progresses. All in all, we believe it is prudent at this time to maintain elevated levels of liquidity as we navigate through the recovery period. Following the phased reopening of New Zealand's borders, bookings have been very strong. The charts on the slide give you a sense of the momentum we've experienced both for domestic and international bookings since those travel restrictions started to lift from March 2022. As you can see, the trend continues with high booking levels through August and into September.
This performance and a review of the latest forward bookings profile led us to update the market yesterday, which I'll touch on shortly. On our domestic network, bookings are currently at around 105% of pre-COVID levels, and importantly, corporate bookings continue to trend towards pre-COVID levels. On the international network, we now have almost all of our offshore routes operational, and capacity has recovered to around three-quarters of 2019 levels. We currently expect FY23 capacity at around 75%-80% of pre-COVID capacity, which is a bit more growth than we had anticipated back in March when we launched our recapitalization, and that reflects the stronger demand environment. It also reflects our expectation that we will have the remaining triple seven three hundred wide-body aircraft flying by the end of FY23. From a forward sales perspective, the trend is much the same.
Our weekly revenues have been above pre-COVID levels due to limited capacity. Average fares are also higher, again reflecting the elevated cost environment. If we just take fuel alone, which is our second-largest expense item in the P&L, we have seen huge volatility across the past six months, with the fuel prices up almost 60% on FY19. Like all businesses that rely to a degree on discretionary spend, we are closely monitoring consumer behavior, given cost of living and inflationary pressures and that risk of a global recession, all of which have the potential to slow our recovery. While we have not yet seen an impact on demand, we are sensitive to these factors and remain committed to ensuring our pricing is affordable and competitive across our entire network, but particularly for domestic travel here in New Zealand.
That is why you'll continue to see us offer 100,000 tickets under NZD 100 across the domestic network at any one time. This gives customers the opportunity to book further in advance to secure cheaper fares. As the world reopens again, our team have been excited to get back to doing what we love, reconnecting families, friends, and colleagues, both within New Zealand and around the globe, and bringing tourists back to our beautiful country. However, rebuilding the airline after more than two years of subdued operations and in the face of an unprecedented surge in demand, it's provided its own set of challenges. Challenges that other businesses here in New Zealand are facing and challenges that the broader aviation industry globally is also experiencing.
Many of these are outside our immediate control, but we are doing everything we can to mitigate their impact. We're currently operating in a very tight labor market, and until recently have had the highest levels of employee sickness we have seen in more than a decade. In response to this, you will see we have proactively reduced our schedule over the coming spring and summer months to provide customers with increased surety over their travel plans and to avoid a repeat of the level of cancellations we experienced through July and early August. We've also undertaken a significant recruitment drive, employing more than 1,000 additional staff in the last three months, and training them at pace to provide further buffer to the schedule and to support our operations.
Adding more capacity will also help, and we have had an additional two of our Boeing 777-300 fleet rejoin us in the last two months. Next month, we will welcome our first domestic A321neo aircraft, which will provide an extra 46 seats per flight on domestic jet routes. I do wanna say a huge thank you to our customers for their patience as we rebuild our network. We are working hard to restore reliability and resilience into our flying schedule and to give customers of Air New Zealand the experience that they know and love. I also want to acknowledge the unwavering dedication of our incredible team, led by Greg Foran, our Chief Executive. Restarting the airline at pace has tested us and has involved a huge amount of mahi from every single Air New Zealander.
Our people have remained firmly focused on delivering for our customers despite the challenges, and for that, I am immensely grateful, and I know this sentiment is shared by the entire board and executive team. I also don't want to shy away from some of the big wins we've had as a company in the past year. I know that when times are tough, we tend to focus on the things we need to do better, and that's understandable. The reality is our people have worked exceptionally hard and achieved some huge successes. I'm not gonna go into every one of these, but we have been named the world's safest airline by AirlineRatings.com, and we have achieved the number one corporate reputation in the Kantar Corporate Reputation Index for the eighth consecutive year.
We have settled 14 collective agreements with our unions and won health and safety awards for our leadership and response to the COVID-19 pandemic. More recently, we were awarded the Best Air Cargo Carrier Oceania for the second year running at the Asian Freight, Logistics and Supply Chain Awards last week. We were up at those awards against the likes of Qantas Freight and Virgin Australia Cargo in these industry-nominated events. Perhaps most importantly, we launched NZ0, an evolving body of work that will allow our customers, investors, and other interested stakeholders to access transparent and digestible information about our progress as we focus on decarbonizing the airline to reach our goal of net zero carbon emissions by 2050.
We also became the second airline in the world to announce an ambitious interim science-based target, which was validated by the Science Based Targets initiative, an independent body responsible for endorsing emissions targets. The 2030 target will act as a key milestone guiding us on our journey to 2050 and will hold us accountable to take action today. Earlier this year, we completed a NZD 2.2 billion recapitalization to refuel the airline for our recovery. It was a hugely significant milestone for Air New Zealand after two years of turbulence and has set us up to continue to invest, innovate, and deliver on our strategy Kia Mau. We were pleased with the success of the rights offer. Thousands of shareholders participated, exceeding our expectations and market benchmarks for this type of offer.
The achievement of a 28-cent per share premium in the bookbuild process meant shareholders who did not participate still derived value from the offer. I want to reiterate my earlier comments and thank our shareholders for their continued support. As you can see on slide 11, following the completion of the recapitalization, our balance sheet and liquidity position have been restored with liquidity well above our minimum requirement of NZD 700 million and gearing back within our target range of 45%-55%.
You can also see the various cash inflows and outflows quite well on the chart here, including the repayment of the NZD 850 million we had drawn down on the initial Crown Loan in the lead up to our recapitalization, as well as the replacement and refinancing of NZD 400 million of the NZD 600 million in redeemable shares on issue to the Crown. As noted earlier, NZD 200 million of redeemable shares remain on issue to the Crown and serve as an additional source of liquidity. However, we do anticipate repaying this as our recovery progresses. Likewise, the new NZD 400 million Crown Loan facility announced as part of the recapitalization is not intended to be drawn upon and is there just to provide additional liquidity and only if necessary.
We're really pleased that our key balance sheet and liquidity metrics have been restored following the recapitalization, and we're encouraged by the continued strength and demand since New Zealand's borders reopened. However, we are also cognizant that the borders have only been fully open for less than eight weeks, and there is still a large degree of macroeconomic uncertainty and inflationary pressures ahead. We are also closely watching the competitive landscape. We appreciate the support our shareholders have shown us throughout this pandemic and know that after more than two years of no dividends, you expect a return on your investment. As you can see on this slide, returning the airline to profitability is a key milestone that needs to be achieved before consideration of distributions to shareholders.
It's something that both the board and the executive, something we are keenly focused on. The board will review the airline's performance against the key metrics outlined on the slide on an ongoing basis. However, the board does not expect to consider payment of distributions before there is a sustained recovery in earnings and in the context of a supportive, broader economic recovery and environment. Now, moving on to the outlook for the first half of FY23. As disclosed to the market yesterday, our forward sales continue to be strong, particularly for travel through to January 2023. On the basis that this strength continues, and assuming a fuel price of $130 per barrel, we currently expect earnings before other significant items in taxation in the range of NZ$200-NZ$275 million.
We would caveat this by noting that there are many factors that have the potential to slow our recovery and significantly impact our earnings. Fuel and demand for the second half of the year being two key examples. On this basis, and taking into account global recessionary risks and other macroeconomic factors, including inflationary pressures on costs, the airline is not providing full year guidance at this time. The airline strongly cautions against extrapolating first half FY23 earnings guidance to the full year given the many uncertainties that exist. I would now like to briefly offer a few comments on my re-election nomination today before handing over to Greg. This sees the conclusion of my first term as Chair of Air New Zealand, having served a term prior to that on the board as a director.
My term as chair has coincided nicely with COVID-19 pandemic, so it's been an interesting and challenging time for every Air New Zealander and for every New Zealander for that matter. I consider it an absolute privilege to be the chair of the board of this company, and while it's involved a lot more work in the last few years, it has been something very significant to chair the board through a period of such challenge and to see us move through into this recovery phase. For those of you who don't know me, I am a Wellington-based director, which sees me on a plane reasonably often, which is good in terms of meeting crew and giving Greg lots of great constructive feedback on our service.
I have a career that has spanned three kind of distinct phases. The first one as an external auditor, focusing largely on banks and financial institutions. The second, in sport, and leading global major sporting events. The third being in governance. In my governance career, I've chaired the board of TVNZ. I have chaired the MFAT International Aid Board for the government. I currently obviously chair Air New Zealand, and I am also the chair of ASB Bank, and I chair the UN's climate change initiative here in New Zealand called Chapter Zero. I am very committed to staying on the board and leading us through these next phases and as we lead towards profitability and dividends for shareholders, and I humbly seek your support today for my re-election.
With that, I would like to thank you, our shareholders, for your loyalty to the company and for your time here today. I will now invite Greg to address the meeting, and you'll have to bear with us as we raise the speaking things in front of you because he's a little taller than me.
They've done it magically, Therese. Thank you, Dame Therese. Tena koutou, oku rangatira, nga mana whenua, koutou katoa, nga mihi. Kia ora, and good afternoon, everyone. You know, as Therese mentioned, it's been another big year for our airline and for all Air New Zealanders. From completing a recapitalization and getting ready to launch our very first new route since 2018, to just keeping the airline humming and the aircraft crewed and getting customers where they need to be. We could not have achieved so much without the incredible team of Air New Zealanders who make this airline what it is. I'm continually impressed by our team and what they can achieve. You know, our guiding principle through all of this has been to do the right thing by our customers, by our people, by our shareholders, and by the communities that we fly to.
For customers, we've been focused on restoring services, maintaining a choice of fares, and continually innovating to improve their journeys with us. We froze the status for Airpoints members. We've kept our pricing fair and provided compassionate refunds for those facing hardship. Just last week, we extended the expiry date on all credits so that any customer with a credit at the end of September this year will have until the end of January 2024 to book a new flight, and by December 2024 to fly. We know customers value our transparency, which is why as sickness levels caused disruption, we took action to protect the travel plans of our customers by reducing our schedule by 1.5% over the coming summer months.
You know, when demand returned more quickly than expected, we did the right thing by hiring additional support at places like the contact center, training and retraining crew, and reinstating our COVID flexibility policy. For our amazing staff, we provided one-off awards to acknowledge their extra mahi. Across FY22, we lifted our lowest wages. We've created opportunities to cross-skill. We've settled 14 collective employee agreements and reinstated many employee benefits. We've also welcomed more than 1,500 people to the Air New Zealand whānau in the biggest recruitment drive in our 82-year history. For you, our shareholders, whose support has refueled this business for recovery and future growth, we've completed a recapitalization, including an equity raise that was structured to be fair to all shareholders, including those that didn't take up the rights offer.
For the regions we fly to, we've been with you during some really tough times. You know, we launched a temporary service from Northland during Auckland's lockdown. When flooding devastated Timaru, we added daily flights to keep much-needed personnel and supplies flowing. We added travel flexibility and credits for those affected by the recent Nelson flooding emergency. We've also focused on getting the balance right in terms of the costs we bring back into the business, especially in this environment of higher inflation. A key priority in the short term continues to be hiring and training people to support the rebuild of the network. That's the right thing to do to ensure resiliency of our schedule for our customers as we head into the busy holiday season.Flexipay However, this pandemic has given us the opportunity to reset our business, not only with where we fly, but how we operate this airline with smarter and more efficient practices. To that end, we've been investing in new infrastructure and digital tools, improving our processes, changing how we work, and all of these things are important to driving a sustainably improved cost base. Our airline plays an important role in keeping New Zealand connected, and we take that responsibility very seriously. While I acknowledge we've been far from perfect, we've never strayed from the simple principle to do the right thing. Time and again, this has guided our decision-making, and we've worked hard during the pandemic to create new products and services to differentiate and delight our customers. Flexipay
We also know that we must find a more sustainable way to fly, and we've taken some important steps in this journey, which I'll cover on the next slide. You know, guiding every decision we make is our Kia Mau strategy. It's the flight plan that has helped us navigate through COVID-19 and into Revive, and that will eventually guide us to Thrive. It starts by building a really robust domestic business that fits perfectly with our purpose and will be crucial for our return to profitability. We wanna keep building demand back, adding more flights, offering different time slots alongside developing innovative products like subscription services and improving experiences in the air and on the ground. We're shifting the focus of our international network, doubling down on the locations we know customers want to fly to and offering better schedules.
Our aim is to have a single wide-body fleet focused on premium leisure customers and cargo in the Pacific Rim. The launch of our non-stop service to New York builds on this. Now, loyalty is a source of untapped potential for new revenue and a superb channel to deliver on our promise of differentiation. We're making headway on elevating our loyalty business to one that excites customers to use and earn their Airpoints.
We want to become the world's leading digital airline by revamping our app and digital offering, and we're focused on running our airline like a Swiss watch with safe, efficient operational performance and building a rewarding place to work with an uncompromising focus on keeping staff and our customers safe. We're acutely aware that to continue to connect Kiwis to the world and the world to us, we must play our part in addressing the impact of aviation on climate change and focus on reaching net zero carbon emissions by 2050. Now, despite the upheaval of the pandemic, I believe that climate change is the biggest challenge facing the aviation industry, and that's why we've committed to our 2050 goal and are making progress on this.
You know, our first delivery of sustainable aviation fuel has arrived, and we're working with the government to understand how it could be produced here in New Zealand. Now, I've also just returned from a trip to the U.S., where we visited a startup creating a world's first all-electric aircraft, which could transform aviation as we know it. These new aircraft won't just cut our carbon emissions, they could connect regional New Zealand in a different way.
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This is another example.
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of how we're bringing our Kia Mau strategy to life. Now, while we still have much work to do to achieve our emissions reduction targets and are reliant on other parties to do their part, we're committed to taking genuine action to reduce our environmental impact. While a great plan is one thing, it's how we execute it that really matters, and that's why we're also in the middle of an organizational transformation that will see our people empowered to be themselves, to do the right thing, and deliver exceptional service and products for our customers. It's this transformation that will help us deliver on our strategy and unleash the full potential of our people. We are rebuilding as a stronger, more nimble airline, and we're confident we have the right strategy and the right team to deliver for all Air New Zealanders.
As Therese spoke to earlier, we are firmly in the Revive phase of our recovery, but we've got our eyes fixed further on the horizon in getting Air New Zealand to Thrive. We haven't been sitting around waiting for demand to recover. Instead, we've taken the opportunity to redefine what our business could be. In this new world, we believe differentiation will be hugely important, and we've created new ways and offerings to excite our customers that set us apart from competitors. If we get this right, our customers will have the greatest flying experience on Earth. You know, I've never been more optimistic about the future, and we're seeing optimism in travel return, not just in bookings, but in the joy of getting out to experience the world.
On a personal level, it's been terrific to see customers out on the network, some of them using their passports for the first time in several years. It's a special role Air New Zealand plays in connecting Kiwis with the world and the world to them. We've got a fantastic network focused on serving our customers and where they want to fly. Always with an eye to the future, we're engaging with manufacturers and startups on future hybrid and electric aircraft, particularly for our domestic network. Air New Zealand has an ambition to be a truly digital airline with Aotearoa New Zealand uniquely placed to test ideas, and Air New Zealand the perfect airline to do so. We're teaming up with the world's best companies, and I look forward to sharing more soon as we start to turn our ambition into a reality.
I firmly believe when people look back on this turbulent period in our history and reflect on Air New Zealand, they won't just recall how we survived a pandemic, but how Air New Zealand used this time to build new foundations. I hope they'll recall that we didn't just rebuild, but we took this moment to reimagine what our business could be, and we reinvented ourselves to deliver something truly special. Finally, I want to thank you for your continued support of Air New Zealand and your patience as we've navigated through this extraordinarily difficult time. Your commitment means a great deal to us. In return, you have our commitment to do everything we can to contribute to the success of Air New Zealand. The whole Air New Zealand whānau is focused on building back as a smarter, stronger, more sustainable airline. Tena koutou, tena koutou, tena koutou katoa.
I'll now hand the meeting back to Dame Therese. Thank you.
Kia ora, Greg. Thank you for your address. I'm now gonna open up the meeting to any questions that any shareholder may have that specifically pertain to the company's 2022 performance. If you've got general questions, I'd just ask you to hold them to the end of the meeting, and we'll address general questions then. Are there any questions in relation to the financial performance of Air New Zealand during FY22, either here in person in Auckland or online? Okay, thank you. Can I just check if there are any questions online?
Uh.
There are.
Thank you.
Your first question is, "Qantas hasn't paid a dividend for 3 years, but recently launched a $400 million on-market buyback. Given our share price is so cheap, what are the prospects of us launching a buyback, or do our financial metrics not allow for this for the time being? Would you need approval from banks or the New Zealand government to launch a buyback?
Thanks for the question. I think where we are at Air New Zealand at the moment, as we've been saying this morning, our borders have hardly been open for eight weeks, and we've only a few months ago completed our recapitalization. Our view is that there are a number of things that we need to contemplate over the next wee while. Firstly, to see whether or not demand. What the patterns of demand look like into the future. We also have some uses for our current funds in terms of repaying the redeemable shares and some CapEx that relates to both aircraft and non-aircraft. What we want to do as a board and as an executive is to continue to monitor our financial performance and keep all options open to us in the future.
At this time, we're not in a position looking to either a distribution or a buyback. Thank you. Are there any further online questions?
There are no further questions.
Okay, excellent. All right, well, thank you very much. No further questions have been received. Now, we'd like to move to a new part of our AGM, a new initiative, which is where you will get the chance to hear from our three board committee chairs. Firstly, I would like to welcome Dean Bracewell to the stage to share some insights about our Health, Safety and Security Committee. Kia ora, Dean.
Thanks, Therese. Must've been having a good day that day. Kia ora, and good afternoon, everyone. It's a pleasure to be here with you today. I was appointed to the Air New Zealand board in April 2020, and I'm currently the chair of the board's Health, Safety and Security Committee. This committee is tasked with the governance of the health, safety, and security of our people, our customers, and the various stakeholders we work with. We provide guidance to management on key elements of our health, safety, and security processes and monitor the effectiveness of the internal control and risk management frameworks. As an airline, health, safety, and security are crucial to our license to operate. The entire board receives monthly reports outlining events and trends relevant to these areas.
On top of this, the committee meets quarterly with representatives from our management team and our frontline people to discuss the airline's performance, including any material incidents or identifying emerging risks, and to ensure open and direct communication with the board. Our directors are also strongly encouraged to visit the various ports we operate to and from to discuss key issues with our frontline teams. For FY22, and indeed the past two and a half years, the committee's focus has naturally been weighted towards the well-being of our people as we dealt with COVID-19. More recently, the committee has focused on the restart of the airline and safely building back up to scale. Through these phases, the committee has recognized the stresses on employees and paid particular attention to how management is addressing this.
The committee and the wider board were particularly pleased when Air New Zealand's efforts in this space were recognized with awards from external bodies this year. Firstly, by WorkSafe for the leadership shown in the airline's COVID-19 response plan to protect staff, passengers, and contractors. Secondly, by HeadFit for the work we undertook with regards to the mental health and well-being of our people. Your directors have visited many ports, from Kerikeri to Queenstown to Sydney to L.A. We've had in-depth discussions on many key matters, such as the reanimation of our triple seven aircraft from the desert in the U.S., and we spent time in baggage handling areas of operation and in the holds of aircraft to view safe loading practices in action. We have also met with key stakeholders, including the Civil Aviation Authority and Avsec, to discuss security screening processes.
From my perspective, health, safety, and security will always be a work in progress as operating conditions change and factors both within and beyond our influence impact us. Accordingly, the identification and management of new, emerging, and cumulative health, safety, and security risks remains critically important and is not an area the committee or the board will compromise on. The Air New Zealand team continue to be leaders in the field of health, safety, and security, and your directors will continue to be actively engaged in the governance of this crucial area. Thank you. I'll now hand over to Alison Gerry.
Thank you, Dean. Tēnā tātou katoa. It is a real pleasure to be here today. I'm Alison Gerry, and I was appointed to the board in October 2021, and I'm currently the chair of the Audit and Risk Committee. My fellow committee members include Dame Therese Walsh, Dean Bracewell, Laurissa Cooney, and Claudia Batten. The Audit and Risk Committee is a subcommittee of the board, and our key purpose is to advise and assist the board to discharge its responsibilities in relation to financial reporting, risk management, and compliance. Our committee is focused on making sure we've got the right policies, processes, systems, and controls in place. You might ask, "Well, what does that actually mean?" We meet four times a year, and generally, each meeting is split into three parts.
We spend time on accounting and financial matters, we discuss risk management activities, and we review our internal audit and compliance matters. It's not going to surprise you that out of the four meetings, for two of them, we're very focused on our financial reporting. In August and in February, we recommend the full and half year accounts to the board. In those meetings, the committee considers the major areas of judgment. We discuss any accounting policy changes, and our overriding goal is to ensure that our financial statements give a clear and transparent view of our financial position to shareholders. Given the high levels of uncertainty during the COVID-19 period, the committee spent a considerable amount of time ensuring we were comfortable with the forecast liquidity position and importantly, that our disclosures reflected the challenges that we were facing.
It's very pleasing to see that our external auditors have no longer noted the impact of COVID-19 on forecast liquidity as a significant audit matter, given our recent recapitalization. Going forward, one area for our committee is to focus on developing our disclosures in relation to climate change risks under the Task Force on Climate-related Financial Disclosures. The second area we discuss at each meeting is risk management. This is a key focus for the November and the May meetings. The committee reviews the overall group risk profile, including risk controls and the effectiveness of those controls. Some of the key risks we spend time discussing include climate change risks, global uncertainty, cybersecurity, technology and data risks, and workforce risk. We're also looking to define more explicitly what our appetite is to accept these risks using a scale of averse to open and developing specific target and tolerance metrics.
The last area I want to mention is our focus on audit and assurance matters. Air New Zealand might have great policies, processes and controls, but it's really important to check whether they are actually effective and ask ourselves if there are areas for improvement. We have a great internal audit team that helps provide this critical assurance, and we also rely on other independent parties, including our external auditors, Deloitte. I hope that gives you some insight into our Audit and Risk Committee. Thank you. I'm now going to pass over to Jonathan Mason.
Thank you, Alison, and good afternoon, everyone. Ko Jonathan Mason toku ingoa. Tēnā koutou katoa. I'm Jonathan Mason, Chair of the People, Remuneration and Diversity Committee. The committee seeks to protect and enhance the most important asset of Air New Zealand, namely the 10,000 employees of the airline, from entry-level employees all the way up to executives and the CEO. We meet this objective through multiple activities. For the leadership group, we design appropriate long- and short-term incentive performance packages. In our latest short-term incentive plan, we graded management on five measures, including return on invested capital, controllable costs, customer satisfaction, on-time performance, and risk control effectiveness. For 2022, we met 67% of our target for these measures. Now, those measures follow the concept of a balanced scorecard.
Rather than just looking at finance, we look at different measures of health within the airline, just sort of as a bit of a background. Moving on. Our long-term incentive plan only tracks Air New Zealand's share price performance compared to other airlines and the NZX 50 companies, listed companies in New Zealand. Here, we did not meet our hurdles for payment because of Air New Zealand's relatively weak share price performance. The committee also tracks employee sentiment through quarterly surveys, measuring their confidence in management, our strategy, and satisfaction with the Air New Zealand working environment.
Now, as Dean, Greg and Dame Therese talked about, during the pandemic, it was quite challenging monitoring employee well-being because we were faced with the twin challenges of employees no longer being at work, many of our office employees worked from home, and the underlying uncertainty around employment for the airline. I mean, we laid off thousands of employees. It has been heartening over the last, say, 12 months to rehire thousands of employees, as Greg and Dame Therese have noted. Now we're in a more stable environment, so the committee has shifted toward reviewing turnover by function to just monitor how we're doing on retaining our talent. It's quite a competitive labor market that we're facing now. We also spend time, a new activity, reviewing our talent and succession plans for leadership and performance positions.
For leadership positions, the committee considers, like, whether we can promote someone internally and what we're doing to make managers capable of either moving up to the next level or a new position that they're interested. Sort of career development, we're very interested in. As we move to a new work system called Full Potential, talent management has been extremely important over the last six months. On a broader scale, we provide oversight to management's effort to negotiate agreements with unions, Greg referred to that create good outcomes for our employees, plus support the ability of Air New Zealand to grow profitably.
The final activity, and last but not least, the committee works with management to make Air New Zealand as diverse and inclusive a workforce as possible, so that we can hire the broadest set of the most talented employees for Air New Zealand. We've made progress on women in top positions, with 45% of our leadership team made up of women in 2022. We want to make Air New Zealand an inclusive place, not just on gender, but ethnicity, disability, age, and sexual identity as well. Māori and Pasifika employees ended 2022 at 15% of leadership positions. We have a bit of work, us and management, to do to further identify leaders for promotion within this group. That's a summary of the activities that we work on, people, remuneration, and diversity. Thank you for your time.
I'll now hand back over to Dame Therese.
Kia ora, Jonathan, and thank you to our three chairs for their address. Now it's time to come to the formal resolutions of the meeting. Just a reminder that the resolutions for consideration today may only be voted on by shareholders, proxy holders, and shareholder company representatives. The matters to be voted on today are the re-election of two existing directors who retire by rotation, being myself and Jonathan Mason. In addition, there is a resolution to ratify the entry into and performance by the company of the amended Crown Loan Facility. A further resolution to ratify the entry into and performance by the company of the new Crown Loan Facility. As already mentioned, voting on all the resolutions will be conducted today by poll, and when you registered on arrival, you would have validated or been given your shareholder voting card.
If you are a shareholder and did not register on arrival and wish to vote, please make your way to the registration desk outside the room, and staff from Link will assist you. If you are both a shareholder and a proxy holder or shareholder company representative or have more than one holding, you would have received a separate voting card for each holding. When you vote on the resolutions, please complete all voting cards given to you at registration. If you hold shares in joint names and all holders are here today, you will have received one voting card only for your holding. The company secretary holds a record of the valid proxies and postal votes received.
Before I put the resolutions to the meeting, you can see the results of the voting directions given to proxies and the postal votes at the bottom of the slide for transparency. Now we will discuss and vote on each resolution in turn, and Link Market Services will tally the votes at the end of the meeting. Now, given that the first resolution relates to my re-election as a director, I'm going to hand over to Alison Gerry as chair of the audit committee to chair the meeting for this resolution. As you will recall, I've already said a few words in that regard. Thanks.
Thank you, Dame Therese. Both directors standing for re-election are strongly recommended by the board and have been confirmed by the board to be independent directors. Dame Therese was appointed an independent non-executive director of Air New Zealand in 2016 and became chair in 2019. As we've heard earlier, she's also the chair of ASB Bank Limited, the Chapter Zero New Zealand Steering Committee, and a director of Antarctica New Zealand. Dame Therese is a fellow of the New Zealand Institute of Chartered Accountants and became a Dame Companion of the New Zealand Order of Merit in June 2015. Further credentials of Dame Therese are detailed in your notice of meeting. I move that Dame Therese is re-elected as a director of the company. Is there any discussion from the floor or online? I can't see any.
Do we have any questions online?
There is.
Oh, there is.
The first question is, did any of the five main proxy advisors recommend a vote against any of today's resolution? Will you disclose the proxy votes before the debate on today's resolutions, so shareholders can ask questions about the reasons if there have been any protest votes?
I might ask on Dame. Do you mind if I, Ali?
Yeah.
I'm not aware of any votes against any of the resolutions. Sorry, I'll just start that again in case you couldn't hear. I'm not aware of any votes against any of the resolutions today. I am aware that one of the proxy advisors gave a qualified vote in favor of the re-election of both myself and Jonathan. That was given that we sit on the People, Remuneration and Diversity Committee. My understanding is that the concern is in regards to the disclosure of the specific merits of the chief executive's STI. We're always looking to improve disclosures, and I think Jonathan's already made some further comments in that regard today in his address. We'll be looking to further evolve our disclosures in the next few years. Thank you for the feedback on that one.
You can see the proxy votes. They'll come through on slide 26 of the presentation as we move through. Thank you. Great. Thank you, Dame Therese. So if there are no further questions on your voting form under Resolution 1 to re-elect Dame Therese Walsh, please tick the box either for, against, or abstain. Thank you. I'll now hand you back to Dame Therese to facilitate the remaining resolutions.
Thanks, Alison. I'm now going to turn to the re-election of Jonathan Mason as a director. Now, Jonathan has over 30 years experience in the financial sector, and prior to joining Air New Zealand's board in March 2014, he was Fonterra Co-operative Group Chief Financial Officer from 2009. Mr. Mason has had governance experience with organizations in both New Zealand and the United States, and his current directorships include Chair of Vector, Director of Westpac New Zealand Limited, and Zespri Group Limited. You can find further credentials of Jonathan detailed in the notice of meeting. It should be noted that Jonathan has advised of his intention to step down from the board in 2023. I will now invite Jonathan to give you his comments in relation to his re-election. Thanks, Jonathan.
Hello again. As I mentioned earlier, I'm Jonathan Mason, Independent Director for Air New Zealand. I've been at Air New Zealand for eight years. As noted in the earlier address, I'm also Chair of the People, Remuneration and Diversity Committee. When we get together, like after a meeting like this, one of the most common questions I have or I get is: What do you actually do as a director? Like, so other than sit here at this meeting. I thought it would be good to just give, like, some examples of what I do. As a director with a finance background, I help provide oversight to ensure that the financial statements that we present to you are accurate and timely, as Alison discussed. I try to provide oversight and analysis on management proposals.
Basically to spend your money wisely. Air New Zealand has a substantial capital investment program, substantial operating expenses, and that's one of the board's jobs, is to provide oversight and review that all. Finally, I try to contribute as again, Alison noted under Audit and Risk, to identifying and addressing important risks to the company before they cost us money and our reputation. Sort of the fence at the top of the cliff rather than the ambulance at the bottom. As noted earlier, in my talk, chair of the People Committee try to protect and support our most important resource and our biggest competitive advantage for airline, our wonderful team of Air New Zealanders. As a director now with the longest tenure on Air New Zealand's board, I've been here for the best and worst earnings in at least our recent history.
Before the pandemic, we posted one of the highest shareholder returns on the NZX. As noted in the presentations today, the pandemic caused us to lose the majority of our passenger revenue and has dropped our shareholder return to one of the weakest in the market for the last, say, 2-3 years. Our chief challenge in the next year, as has been noted in the previous presentations, is to restore profitability to the airline despite challenges on costs in the most inflationary environment that we've seen in over 30 years. What makes the recovery exciting and what's great about being associated with Air New Zealand as a director is not just the benefit of restoring profitability to our shareholders, but as a finance guy, that's pretty exciting to me, but also to help restart the important tourism sector and make business travel easier.
Just to give a couple of examples here. Our biggest overseas market, Australia and the US, have three-way trade of over NZD 90 billion. That's what Air New Zealand helps to facilitate. Tourism is linked to annual direct revenues of more than NZD 30 billion. We are a big catalyst in New Zealand's economic recovery. As Greg noted, we have to support these efforts with strategies that lead to a gradual decrease in our carbon footprint. As Dame Therese noted, given my tenure on the board, I will step down in a year and leave the ongoing challenges of airline oversight to my fellow capable directors. I will work very hard for you over the next year and ask that you consider me for re-election as an independent director of Air New Zealand. Thank you for your time.
Kia ora, Jonathan. Thank you for that. I now move that Jonathan Mason is re-elected as a director of the company. I'll just check before we do so, have we received any questions from shareholders, and are there any shareholders in the room with questions, on this resolution? Okay, there don't seem to be any questions in the room. Are there any questions online, Kim?
There are.
Thank you.
The question is: Who will take over as chair of the important Remuneration Committee when Jonathan retires?
Thank you. Obviously, it's a year until Jonathan retires, and in that time, we will be working through as part of our usual succession planning, and we will be working through who will take over as the chair of the PRDC committee at Air New Zealand. We will look to do that quite soon so that that person can spend some time working with Jonathan and shadowing him in his role, so they are ready to hit the ground running when they take over at about this time next year. Thanks. Are there any further questions, Kim?
No further questions.
Thank you very much. On your voting form under Resolution 2, to re-elect Jonathan Mason, please tick the box either for, against, or abstain. Thank you. Given the significant challenges faced by the airline as a result of national lockdowns and restricted travel from March 2020 with the onset of the COVID-19 pandemic, our majority shareholder, the Crown, agreed to provide funding under varying arrangements. This was crucial to enable the directors to continue to operate the business throughout the pandemic and to ensure the company was in a position to meet its financial obligations. The listing rules require the company to obtain shareholder approval prior to entering into certain types of transaction, including where the transaction value exceeds 50% of the company's market capitalization, as was the case with these funding arrangements.
Given the particular circumstances of this situation and the need for expediency, the NZX agreed to waive the requirements for shareholder approval at that time, but made a condition of these waivers that shareholder ratification was subsequently obtained, which is now what we are doing today. Further details are included in the notice of meeting and the waiver decisions, but Resolutions three and four pertain to this ratification. Shareholders should also note that the Crown is not prohibited from voting on these resolutions. I move that Resolutions three and four are ratified by shareholders. Before doing so, I will just check if there are any questions from shareholders in the room on those resolutions. There appear to be none. Kim, can I just check if there are any online? Thank you.
There is one.
Thank you.
The Air New Zealand annual report notes our largest shareholder with 51% is Her Majesty the Queen in right of New Zealand acting by and through her Minister of Finance. Have we formally transitioned the controlling government shareholding to King Charles III, and is he aware of today's resolutions dealing with further loans?
I would say that King Charles III is not aware of the resolutions that we are contemplating today. I think he'll have a number of other priorities. However, all of those holdings from Her Majesty the Queen on behalf of the Crown, the government holding them on behalf of Her Majesty the Queen as the Crown, will automatically transfer to King Charles III. You'll expect to see that at the next meeting. Are there any further questions, Kim, online?
There are no further questions.
Thank you very much. Okay, so no further questions have been received. On your voting form under Resolution three, to ratify the entry into and performance by the company of the amended Crown Loan Facility, and Resolution four, to ratify the entry into and performance by the company of the new Crown Loan Facility, please tick the box either for, against, or abstain. Okay, thank you, everyone. Can I just check that everyone who wishes to vote has done so? Okay. Link Market Services will be collecting your voting cards as you exit the room, and once all the cards are collected, Link Market Services will count the votes. Shareholders participating via the virtual meeting website should now submit their votes, and voting will be open until we have formally closed the meeting.
The results of the voting on today's resolutions will be announced to both the NZX and the ASX after the conclusion of the meeting. Right. I now welcome you to sit back, relax, and watch the following video, and then we'll proceed to a general question session. Thanks, everyone.
Air New Zealand is made of people.
In my head, I play a supercut of us.
If you pluck the center shoot of the harakeke, where will the bellbirds sing? The harakeke is a metaphor for family and for flourishing communities. If we look at the harakeke, the outer leaves are the grandparents, whom are embracing the parents, whom are embracing the young child.
I've been with Air New Zealand, 37 years.
Supercut of us.
My dad joined NAC as a pilot in the 1950s, so we've had a long history, over 60 years now.
Supercut of us.
I loved flying, of course. It was a very small airline at the time. There's the picture of me as a poster girl for Air New Zealand.
The generations of those whom have worked with Air New Zealand are encapsulated in the harakeke.
I started when I was very young. You don't become a flight attendant just because of a job. No. It's a company, it's the people, it's the friendship, it's the adventures. It's a calling, more or less.
'Cause I remember you.
I was one of 12 hostesses. Once we married, we had to leave the airline. Things were a little bit different in that day and age.
I was appointed as the first female airport manager in the company's history. That was back in 1983. I think that set the path for other females within the organization to be successful.
Supercut of us
The success is built and founded upon the people who are a part of the culture.
Our team work in all of the elements. It can be as cold as yesterday,five out on the tarmac. Nothing better than being able to come inside. They can get a hot cup of soup and warm themselves up. It's, you know, one way we can show our appreciation as a team.
He tangata.
It's people. Passenger came in very stressed. Her pet cage was of the wrong size, so I was able to shoot down the road and get her a regulation pet cage, so she was able to catch her flight on time.
When we went into lockdown, the teams had to make up wheel covers and things to put the planes into storage. What we designed was universal fitment for all three types of planes. We ended up making over 100 covers, and it was all about the teams coming together.
He tangata.
It's about the people.
It's all about you, Steve. Like, just, this guy, that guy. Good crew.
I can understand where they're coming from when they say that they wanna be with their family, but they can't. When I rung her to tell her that we have a flight for her, she just broke down. The relief that she felt that she can actually be with her loved one.
Four months after I lost my job, I got a phone call and they said, "Hey, Ernst, wanna come back?" You know, when you jump on a trampoline and you go up, that's how I felt. I was right up there again.
When I joined the company, my dad was very unwell, and wife was pregnant. She was due. Soon as the managers find out, they said, "Nah, you go home. Don't worry about here. We'll look after you." Really, really lucky to be part of this team.
I feel like the airline's always been there for me and my family. It's about the people.
He tangata.
I feel more connected with this place.
We're part of something that's pretty big and pretty awesome, and I'm proud of that.
All my family's in Germany, but I've got my other family, my airline family, and that's. It's magic.
Kī mai koe ki ahau. He aha te mea nui i te ao? Māku e kī atu. He tangata, he tangata, he tangata. You ask me, "What is the most important thing in this world?" I say unto you, "It is people. It is people. It is people.
Thanks. I will call the meeting back to order. As a reminder, the results of the poll will be made available on both the NZX and the ASX after the meeting. I would now like to open today's meetings up to any other general questions you may have. Can I please ask that we use this time to focus on questions relating to matters that are relevant to the airline. If you do have any customer-related matters that you would like to address, please direct your comments to our investor relations team, or we can have a chat at the cup of tea afterwards. For those in attendance, I will remind you again, please wait until a microphone is provided to you before asking your question, and please state your name.
While we await for members of our audience and our online shareholders to ask a question, I will address some of the questions we've received prior to the meeting. The first question is: Can an amendment be introduced that drops management and director fees every time shareholder dividends are completely canceled, as it would only be fair if all suffer the pain of going without? Okay. Thanks for your question. I think, if we reflect on the last few years, for FY 20 and FY 21, there were reductions during those periods of time in salaries and in directors' fees for many people. Certainly no increases were provided. But as you move forward, we need to be in a position to actually have the talent available to Air New Zealand to build value for our shareholders.
We believe as a board it's the right time to reinstate our normal remuneration protocols to ensure that we retain the best leadership and the best resources within Air New Zealand that we possibly can to build value for you, our shareholders. I think there have been cuts at the right times, but it's again time to move into our Revive and Thrive periods, fully resourced. Thank you for the question. Question two: How long do you think Air New Zealand will return to full capacity in business and thus begin to see positive profits again? Right. Well, in terms of profitability, we made some forecasted sort of statements around the time of the recapitalization earlier this year. Obviously, things have changed.
We've updated guidance to the market yesterday. Really, though, as we stand here today, we still don't know exactly when we will return to profitability. There are so many things going on. We've talked a lot today about this really strong demand return that's coming through, and that's really exciting. But at the same time, there's a number of pressures coming through, and again, those have been referenced a number of times today. Whether that's the very volatile fuel price, whether that's the inflationary cross pressures, cost pressures on discretionary income, other macroeconomic factors, and exactly how we're going to track with the coming out of the pandemic over the next few years. It's really hard to predict profitability. All I can say is, as of today, we are cautiously optimistic about how things are tracking.
Again, that uncertainty continues to exist. Okay, thank you. We'll now move to questions from the audience and our online shareholders. Can I just see if there's anyone in the room that has a general question for us today? Okay, in which case, I will move on to online questions. Kim, can I just check in with you around questions from our online audience, please?
The first question is: When will Air New Zealand reinstate a route to the U.K. or Europe?
Okay, there are no current plans to reinstate a route to the UK or Europe. As many of you will be aware, we used to fly directly to London from previously Hong Kong and also Los Angeles. We stopped doing that a number of years ago, and this is pre-COVID pandemic, and there were a number of reasons for doing so. But I think the key thing to remember is that really, what our Kia Mau strategy tells us and what is our point of differentiation is being able to serve the Pacific Rim, and that's what we really focus on, both Asia, North America, and of course the Pacific Islands. There are no current plans to reinstate any flights through there. Thank you.
Your next question is: Is the 787 the right aircraft for the Auckland-New York route? How often do you forecast the need to offload bags and/or fuel stop? And what impact do you think Qantas flying to New York ex-Auckland will have?
Okay, thank you for the question. We've put a lot of consideration into the aircraft choice for the Auckland-JFK route, and the 787 Dreamliner is our preferred aircraft for this route. It has the ability to do an ultra-long-haul route. It is going to be part of our, as you'll have seen in some of our materials in the last few months, part of our fleet simplification process that we're moving towards a 787 wide-bodied fleet. So we're very comfortable with that. In terms of bags being taken off aircraft, that will happen from time to time across our network for various reasons.
It doesn't happen often, and it was unfortunate it happened on our first flight, and we're certainly looking into that as we speak, and we'll be looking to make improvements as we move forward. Kim, I've just, what was the third part of that question? Oh, Qantas.
Qantas.
Right. In terms of Qantas competing, that's not a surprise to us. Obviously, we've already started flying to New York. I think Qantas is looking to do that middle of next year. In any case, we compete with Qantas and many other carriers on a regular basis, and we really back the Air New Zealand brand. The Air New Zealand brand is held in high regard both in New Zealand, Australia, and many other countries, and we will compete hard as we always do. We think it's a very exciting route. An awful lot of both New Yorkers and Americans who are very keen to travel to New Zealand, and we're seeing that in our bookings, and we're very excited about that. Thank you. Okay, Kim, the next question.
Your next question is: Are Air New Zealand executive salaries and board fees and bonuses based off company financial results? In other words, if the company loses money in FY23 or revenues are far lower than expected, do executives still get paid a bonus?
Okay, the first thing to clarify is that directors receive fees, and they are not related to any type of performance metrics, and that's a sort of a well-understood governance principle. I think when it comes to Air New Zealand's executives, I think Jonathan gave a really good summary of how our bonus structures are put together. They're not solely on financial measures. In fact, we have operational measures and customer measures. There are a number of measures in place there around the bonuses. The performance against those measures, financial and non-financial, will dictate what level of short-term incentive payment any of our leadership and other employees will receive in FY23.
Given borders have only been open for eight weeks, will staff that were made redundant during COVID have their long service travel privileges extended beyond June 2023?
I think that's a reasonably detailed employment matter, unless you've got a very quick comment, Greg, on that. No. I think that's a detailed employment matter that we'll take offline, and we can always respond through the investor relations team if required. Thanks, Kim.
Your next question is: What is the budget for Air New Zealand mobile app development, and when can we expect the app to roll out?
Well, the budget for the mobile app development, I don't know that off the top of my head, and I think that will just be part of a much broader digital spend within Air New Zealand, and there's a number of exciting things happening in that regard, as Greg has outlined. In terms of when we can expect to see the mobile app roll out, Greg, do you have any thoughts on that?
I do. It'll be after we get through the school holiday period, which will be quite busy for us. We're actually testing it at the moment with a number of people. It's going very well, and you'll notice that change when you see it appear on your screens.
Great. I know there are a number of people in beta testing at the moment, and that's exciting, so I'm really looking forward to that. Over to you, Kim.
Your last question for now is: Does the company have any plans to fly directly to any major cities in India? That link would be useful to many residents.
Thank you. There are no current plans to fly to India or actually outside the international ports that we are currently flying to and/or are reinstating, such as Chicago, which is coming online very shortly. I think the key thing to say about potential new routes is that we're constantly reviewing where we are and we will keep things under review, but there are no current plans, and our Kia Mau strategy really confirmed what we had already thought about pre-pandemic in terms of where the best places in the world are and the most sensible places for our brand to be flying. Never say never, always under review, but at this stage, no plans.
There are no further questions online at this time.
Great. Thank you. Can I just check if there are any in the room? Yes, sir, at the front. Just, there's a microphone coming your way.
Hi, my name is James. I'm a retail investor, shareholder.
Kia ora, James.
Hi. I have a question about the revenue, not the profit.
Mm-hmm.
Just read the statement today you released on the NZX. It's shown that the data to end of August, the ASK has recovered to 50.8% pre-COVID, while the RASK has increased to 150% pre-COVID, which means after the calculation, can we say the revenue has backed to 83.3% pre-COVID? Another question is about the definition of capacity. For the capacity, we talk about 70%, 75%, 80%. Does that mean it's the available seat kilometers or available seats? Because, you know, it's easy for us to understand the revenue.
Mm.
Thank you.
Richard, I'm just wondering if you want to answer the first question. Richard is our Chief Financial Officer, and he'll give you a bit more detail.
Kia ora, James. Thanks for the question. Re your first observation around revenue per available seat kilometer, we are in a strong revenue environment at the moment. I think international markets have recovered much faster than we had anticipated they would back in March. But we're in an environment at the moment where both Air New Zealand and internationally capacity is slower to come back to the market than we would probably like. That is a function of bringing, in our case, aircraft out of the desert as quickly as we can, rehiring people back into the business and training them on the appropriate aircraft. We're in an environment at the moment where key people are very keen to travel.
Probably not as many seats in the market available as people would like, and that is sort of appearing to some extent in fares. From a cost perspective, as Dame Therese, the chairperson mentioned earlier, and Greg, we are in a higher cost environment than we were going into COVID. For most of the period under review, fuel prices have fluctuated somewhat. But back in, you know, two or three months ago, they were as high as $165 a barrel, which was twice as high as they were going into COVID. Of course, those of you that read the newspaper regularly in the morning will be aware of the fact that as markets rebuild, not just aviation markets, there are inflationary pressures.
Fares do need to be higher, sort of structurally to accommodate those fuel price increases and inflationary pressures. That's the first part of your question. The second part, which is 70% capacity, we typically talk about that in ASK terms. I think probably the best way of describing where we expect to be by the end of the financial year is the domestic business will be very close, if not slightly bigger than it was pre-COVID in ASK terms. The Pacific Islands and Tasman will be 80%-85% of its former self by the end of the year. Then the long-haul business, probably the slowest one to get restarted, will be back to sort of two-thirds of our pre-COVID capacity, is our expectation by the end of the year.
When you take all that in the round, because the long-haul part of the business represents a lot of ASKs, available seat kilometers for those not familiar with the acronym, that affects the weighted average. You end up around that sort of 70-75 mark at a group level. Hope that answers your question, James.
Thank you, Richard. Thanks for the question, James. Can I just check if there are any further questions in the room? Yes, this gentleman at the front here. There's a microphone for you.
Yes, my name is, Bernard Feehan. I've been a long-term-
Kia ora, Bernard.
... long-term shareholder. Only a small one. Could the board give an assurance that they won't be tempted to go down the path of looking at mergers and takeovers of any other airlines? In the past, it hasn't proved to be a very good idea, and I would like to think in these uncertain times that any really tempting possibility be discarded immediately.
Thank you, Bernard, for the question. I can assure you that there are no merger discussions happening at the Air New Zealand board table at this time. Any other questions in the room? Yes.
Hello. Just a quick question around the loyalty programs. Obviously, you know, Emirates Skywards .
Program is one of the best so far in the market. I'm just interested to know in terms of the loyalty program of Air New Zealand and how that's looking long-term, in terms of attracting more people to stay on the program and actually reap the benefits that they have seen with other airlines.
Well, great question because it is a key pillar of the Kia Mau strategy. We're really focusing on lifting our loyalty program. We already have 3.6 million Kiwis involved, which is fabulous, and from around the world. It's an exciting program and very much part of our focus. I just wonder, Greg, if you might want to add something to that.
Sure. Thank you, Dame Therese. It is the third plank in our strategy. We spent quite a bit of time over this last year reorganizing the back end of that program, particularly in terms of the digital component of that. We do look at other airlines and see what aspects we wanna pick up. You know, there is something quite unique about the Airpoints program with Air New Zealand, and that is the transparency that exists, where there's no adjustment of what points are worth. With Air New Zealand, 1 point always equals NZD 1. We like that concept. At this point, we don't have any intention of moving away from that.
We think there's some aspects of the program that are quite enticing, and ahead of some other airlines, particularly in terms of redemptions of points and those sort of things. Little bit tougher just at the moment with the environment we're in. We're continuing to enhance it. We're looking at other things that we can do. Expect more to come, particularly over the next 18 months.
Thanks, Greg. Are there any other questions in the room? Yes.
Hi. My name is Yang, and
Sorry, Yang.
As we know that the New Zealand dollar is pretty weak recently, so just wondering if that would affect profitability.
I'm sure, Richard, I can see him jumping up to give a bit more detail. He's very excited by that question. Look, FX volatility is something that impacts our business. Perhaps just some brief comments, Richard. Thank you.
Yeah. Just very briefly. The exchange rate affects the business in complex ways, actually. If we think very simply about the fact we have a number of U.S. dollar costs, they obviously go up in New Zealand dollars with a weaker New Zealand dollar relative to the U.S. The counterpoint to that is U.S. dollar revenue, which we didn't have much of during the pandemic, but is starting to recover nicely now, improves. There's an element of natural hedging there. The other area where it impacts the business is on gearing, because a lot of our aircraft financing is secured aircraft financing in U.S. dollars. It can affect, i.e., increase, gearing at the margin as the New Zealand dollar weakens against the U.S.
From a profitability perspective, at the moment, as I say, you win some on the revenue side, we lose some on the cost side.
Thank you, Richard. Any other questions in the room? Okay, I will just check in. There don't appear to be any, so I'll just check in with Kim if there are any further questions online. Thank you, Kim.
We do have one further question.
Mm-hmm.
Does Air New Zealand have any concrete plans to run a cargo business?
Well, we're already in the business of moving cargo, and we have been for some time. Obviously, during the pandemic, where we've had a limited number of passengers, particularly on the international network, we've been really working hard with both the New Zealand and Australian governments and our local businesses in New Zealand and offshore to move a lot of cargo. That's been a really big mainstay of our financial performance over the last couple of years, for which we're very grateful. I think it's. There's no question that's taught us some things. In fact, as of today at our board meeting, we're talking about our cargo strategy.
We continue to want it to be an integral part of our optimizing our international network, part of the CMO strategy, where we move both people and cargo in the aircraft's belly. It's very much continues to be a strong part of our business. Thanks, Kim. Are there any further questions?
There are no further questions.
Okay, thank you. I can see that there's a further question in the room, just down the back.
Kia ora. My name is Wiramu. I'm a shareholder.
Kia ora, Wiramu.
... since 1980. I just wanna know about the clarification about the mask wearing and, like with Air New Zealand, like domestic-
Mm
or international flight. Is it compulsory or is it mandatory, or is it safe for both sides, like the workers and aircraft people and all that, and the workers at the airport? Is it still safe? I reckon it's common sense, isn't it, to be on the safe side for everyone concerned.
Thank you, Wiramu. I will ask our chief executive to answer that question. Thank you.
Yes. It's no longer compulsory to wear a mask either domestically or internationally on our flights. That change was made probably about two weeks ago or a week and a half ago. We conducted our own safety review and involved all our staff in that. We have a strong medical unit within the airline. As you can imagine, our own doctors, we need that to ensure the safety of you, our passengers and also for themselves. We conducted a review, and we believe that the decision that's been reached is the right decision, which is leave it to each individual to decide. What I would say is that that doesn't mean that that is the same approach in any country that you may fly to.
Before you do jump on a plane and fly somewhere, you may just wanna check what are the conditions that are appropriate and applicable to a particular country or a particular airline. For Air New Zealand, either domestically or internationally, masks are not mandatory, but we leave it up to the choice of either customers or staff to do what they see as appropriate, either in the air or on the ground.
Thanks, Greg. That's a really comprehensive reply. We have another question just down the back there.
Hello, I'm a long-term shareholder.
Sure.
Air New Zealand shareholder.
Sure.
I have the question I want to confirm. Is any passenger have to do the test, the things, the nose, the test? I don't know what to say. Before boarding on the plane.
On an Air New Zealand plane?
Yeah.
Yeah. I don't believe so at all.
For domestic, obviously not. That has changed.
Yeah.
My team can help me on this one. Once again, you would just need to check every single country that you go to.
Yeah.
There may still be some that require it. The majority have not, but you should check, and we can help you at the end of this meeting if you like, if you have a specific.
Yes.
-query.
Yes. Yes. Okay, thank you.
Thank you. Are there any other questions in the room? There appear to be none. Kim, do you have any further online questions?
I have one final question. That is, what do you see as the biggest threat for Air New Zealand?
What are the biggest threats you see for Air New Zealand? As Alison mentioned earlier in our Audit and Risk Committee, we continually keep an eye on the risk environment within which we are operating. We have a number of risks that are actually outlined in our annual report, so I'd advise people to have a look at those. There are many of them, so it's hard to be comprehensive today in my remarks. There are a number of things. I think right at the top of the list, you know, in terms of the things that we think about, climate change is very important. Cyber risk, the risk of a cyberattack. There are a number. We've talked about some today.
What's gonna be the ongoing environment, both competitively and within, a macroeconomic situation. Number of risks facing us and all businesses around the world as we speak. For Air New Zealand's specific risks that may be threats to our operations going forward, I suggest reviewing those in the annual report. Thank you for the question. Are there any further questions, Kim?
There are no further questions.
Okay, thank you. There's nothing further in the room. Okay, thanks, everyone. That completes the formal business of the meeting. Thank you, everyone, for your participation and attendance this afternoon. In conclusion, let me say that your continued support of Air New Zealand is very important and very much appreciated. I formally declare this meeting closed. We invite you to join us now for light refreshments and afternoon tea.