A very warm welcome to you all. Thank you for joining the Annual Shareholders Meeting. I would like to now introduce the Chair of Air New Zealand's board of directors, Dame Therese Walsh.
[Non-English content] Air New Zealand. Good afternoon, everyone, and welcome. My name is Therese Walsh, and I am the Chair of Air New Zealand's board. It is a pleasure to welcome everyone online today to the 2026 Annual Shareholder Meeting. We welcome you from our state-of-the-art Hangar 4, based in Auckland, which opened late last year. At Air New Zealand, we are committed to making our shareholder meetings as accessible as possible. However, in light of this year's financial result and our current elevated costs, we have considered all cost-saving initiatives and have chosen to hold the meeting virtually only today.
The cost of holding an in-person meeting is not insignificant, but this is not a precedent for all future meetings, and we will consider all options and locations again each year. We hope that our virtual meeting will continue to support strong participation engagement with our shareholders, and we encourage you to participate through the question and answer sessions. I would like to remind you that our comments today will include certain forward-looking statements regarding our future expectations, which may differ from actual results. We ask that you read through the disclaimer and forward-looking cautionary statement provided here on slide two of the presentation. Before we begin our formal proceedings today, I would like to introduce you to my fellow Air New Zealand board members.
With me in person today and available for questions throughout the meeting are my fellow board members, Neal Barclay, Claudia Batten, Dean Bracewell, Laurissa Cooney, Larry De Shon, and Alison Gerry. I would like to acknowledge Larry De Shon today, our U.S.-based director, who has chosen to retire this year. Larry has five grandchildren now and is starting to scale back his governance work so he can spend more time with his growing family in the U.S. Larry has provided the airline with significant wisdom from his many decades spent in senior roles in the airline industry and as the Global President and CEO of Avis Budget Group. He has made a significant contribution to the Board and the organization through one of the most volatile periods in aviation history. His focus and advice on driving for better operational performance is a contributing factor to our improved performance today.
Larry, many thanks for your contribution to Air New Zealand over many years. It is deeply appreciated. [Non-English content] . Having airline experience on the board is important, and I mentioned at last year's [inaudible]. We searched for two new directors with aviation experience. We have completed that search, and our two proposed directors who are standing for election today are Campbell Wilson and Rob McDonald, and they are sitting here with our board. Campbell is a Kiwi who has worked in senior aviation roles for decades, including two CEO roles. Firstly, at the Singapore Airlines-owned Scoot Airlines, and then at Air India, and he is relocating back to New Zealand. Rob is also a Kiwi with much experience at Air New Zealand as a previous CFO of the company for 14 years and an employee for 25 years and has gone on to a successful governance career.
We look forward to them contributing to the airline at such an important time. [Non-English content] . Also with us in person today is our Chief Executive Officer, Nikhil Ravishankar, our Chief Financial Officer, Kris Cudmore, our General Counsel and Company Secretary, Jennifer Page, Chris Goddard from Bell Gully, the company's lawyers, and Jason Szczygielski from Deloitte, the company's auditor on behalf of the Auditor-General. We also have members of Air New Zealand's executive team, our investor relations team, and our share registrar, MUFG Pension and Market Services, present today. Turning now to the formalities of the meeting, I note, based on the information conveyed to me, there is a quorum of shareholders present, and I declare the meeting open. The 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.
Please note that only shareholders, proxyholders, or shareholder company representatives may vote. As mentioned, this year is a virtual-only meeting. All shareholders will be able to vote and ask questions online during the meeting. Please refer to the virtual Annual General Meeting online guide, which is available on the NZX website and on our investor center website for specific instructions. If you wish to ask a question, please click on the Ask a Question icon on your screen and follow the instructions. I will let you know when the meeting is open for voting, at which time, please click on the Get a Voting Card icon on your screen and follow the instructions. During the course of the meeting, if you need any further assistance, please call the MUFG Pension and Market Services helpline on 0800-200-220, as highlighted on this slide.
The order of events for today's meeting will be as follows. I will comment briefly on the company's performance for the 2026 financial year and on the broader environment in which we are operating. Nikhil Ravishankar, Chief Executive Officer, will then address the meeting, particularly discussing our new strategy and the trading conditions we are observing early into the 2027 financial year. Following that, you will have an opportunity to ask questions related specifically to our 2026 financial performance. I will then move to the formal resolutions of the meeting. We have two resolutions relating to the re-election of directors who retire by rotation today, and we have two resolutions relating to the election of new directors. Voting on the resolutions will be conducted by way of poll.
For all shareholders joining us online, you will be able to cast your vote using the electronic voting card that you received when you validated your registration. If you have any issues, please refer to the Annual General Meeting online guide that has been sent to shareholders and can also be found on our investor center website. Following the voting, I will open the meeting to any general questions you may have. Again, please click on the Ask a Question box on your screen to ask a question online. We have also received some questions from shareholders prior to the meeting, which we will address later in this meeting. Excuse me. As we take a moment to reflect on the past year, I want to start by acknowledging the strength and determination of the Air New Zealand team. 2026 was a year that asked a lot from Air New Zealanders.
As highlighted in our 2026 annual results, as we came to the end of dealing with engine availability disruption, we were then faced with the Middle East conflict and the unprecedented surge in fuel prices, which have impacted our operations and our financial performance. Our team took decisive and immediate action and adjusted operations, schedules, capacity, and fares to mitigate as much of this as possible for our customers, for our operations, and for our financial resilience. Once again, our people delivered. Through persistent disruption, they remain committed to our customers, to each other, and to the success of this airline. I want to sincerely thank each and every one of them for their efforts. Their efforts have delivered significant improvements in our customer satisfaction and on-time performance, and those are things that matter to our customers. Financially, FY 2026 was a very difficult year.
Our financial performance was significantly and adversely impacted by high fuel prices. This came on top of the ongoing impact of engine availability issues and maintenance and aviation system cost pressures, and I will address these financial impacts shortly. Standing back from financial performance specifically, I would like to call out five operational milestones during the year in review. Firstly, the operational performance of the airline in terms of reliability and punctuality improved significantly throughout the year, with on-time performance now in the top decile amongst global comparable airlines. This is the result of an extraordinary effort from Air New Zealanders across the business. Second, our team has worked relentlessly with Rolls-Royce and Pratt & Whitney to return grounded aircraft to service earlier than we expected, and aircraft availability improved by the end of the financial year.
There are still residual risk and cost to work through, but we enter 2027 in a considerably more reliable fleet position than we have had in the last two to three years. Thirdly, we continue to make progress on the things we can control and are accelerating the cost improvements at pace. We have already delivered NZD 94 million of incremental transformation benefits during the year. We have now identified an additional NZD 135 million of annualized savings, including both direct and indirect costs, which will accrue from the 2027 financial year, and this will help to improve our overall cost base and offset expected inflation. This is an increase from the NZD 100 million identified annualized cost savings previously announced in May, and this work is ongoing.
Fourth, we have reset our strategy around three strategic pillars: customer first, targeted growth, and resilient and future fit to deliver sustainable returns to shareholders over time. In addition, aviation system cost inflation continues to impact our financial performance. New Zealand aviation costs have risen at more than twice the rate of inflation since 2019. Air New Zealand and our customers' share of these aviation system charges across New Zealand and the offshore ports we fly to was NZD 1.2 billion in 2026. That's a price increase of NZD 142 million on 2025. However, remedying this will be a longer journey, and we continue to advocate for an affordable aviation system for all New Zealanders.
Moving to slide eight and looking at the FY 2026 result and performance in more detail, we recorded a loss before taxation of NZD 336 million, compared with earnings before taxation of NZD 164 million in the prior year, and slightly better than the guidance range which we provided to the market in May 2026. Approximately NZD 465 million of the profit before tax was impacted from three areas. Namely the ongoing global engine availability issues, which had an impact net of compensation of approximately NZD 190 million. The fuel price, which had an adverse impact of NZD 135 million in the year. From an initial fuel price impact of NZD 328 million, our hedging protection recovered NZD 123 million of this cost increase. Through adjusting capacity and fares in response, we've been able to mitigate about a third of the post-hedged fuel impact.
An increase of NZD 139 million in maintenance costs, excluding FX, driven by additional life cycle maintenance and maintenance costs on leased engines associated with additional engines leased to maintain capacity and schedules during these engine availability issues that we have been dealing with. Our attention is firmly on mitigating these external pressures as much as possible, controlling what we can control today, and improving the commercial and financial pathway for the company. We carried around the same number of passengers as last year at 16 million passengers, while passenger revenue increased 4.8% to NZD 6.1 billion. While RASK increased 3.4%, it was not enough to cover the significant increase in fuel cost, with about 30% of increased fuel price recovered through mitigating capacity and fare activities from March through to June.
Given the price sensitivity of air travel, airlines globally have not been able to recover the full increase in fuel costs. We took quick and decisive action through fare adjustments and capacity reductions to balance affordability for customers and maximize recovery, and we will continue to do so. Capacity increased 1.3%, and while above prior year, second half capacity was about 5% below our original plan as we adjusted to the sharp increase in jet fuel price from March. Our customer and operational metrics continue to move in the right direction. Our on-time performance increased to 84% in the second half of the year, up from 77.5% in 2025, and in the global top decile amongst comparable airlines. Our rebranded Koru loyalty program and new multi-tier membership are resonating well with our customers, with 5.4 million loyalty members, which is up 8.3% on 2025.
Safety will always be our utmost priority, and we are proud to be awarded AirlineRatings.com's Seven Star PLUS safety rating in 2026. Moving to slide nine and the 2027 financial year outlook. Prior to the Middle East conflict, the airline would have expected, in its central case, to return to profitability in the 2027 financial year, reflecting the underlying improvements in the business. However, as mentioned at the 2026 year-end result, there remains uncertainty surrounding the Middle East conflict, and in fact, the volatility of jet fuel prices has escalated even further since then. Jet fuel prices have increased from around $150 per barrel at the end of August to currently around $170 per barrel today, and this fluctuates by the day. As a result, the airline is not in a position to provide earnings guidance for the 2027 financial year at this time.
But we are controlling what we can control, and while the major factors that impacted the 2026 financial result are expected to have some impact in the 2027 financial year, these will all be to a lesser extent. Disruption from engine availability is reducing substantially as aircraft return to service, with financial impact of between NZD 70 million - NZD 90 million in 2027 from residual committed costs, compared to NZD 190 million impact in 2026. Maintenance costs are expected to be NZD 50 million - NZD 100 million lower in 2027 than in 2026. We are also seeing encouraging inbound demand with strong forward bookings into New Zealand. This is a positive signal for tourism and for the country more broadly.
New Zealand remains a highly desirable destination, and our investment in our onboard product and unique Kiwi hospitality puts Air New Zealand in a strong position to bring more international visitors to our shores. The airline expects the 2027 financial year to be both a transition and recovery year, with operational performance continuing to improve despite elevated fuel prices weighing on profitability. We also expect the range of initiatives implemented in response to higher fuel costs to offset a greater proportion of the impact compared with the prior years. We remain focused on executing our strategic priorities, improving financial performance, and positioning the airline for long-term sustainable returns. With that, I will now hand you over to our Chief Executive Officer, Nikhil Ravishankar. This is Nikhil's first Annual Shareholder Meeting as CEO.
We are thrilled to have made an internal CEO appointment for the next phase of our journey, and Nikhil has certainly hit the ground running and is doing an extremely good job in difficult and volatile environment in the last 12 months. [Non-English content] , Nikhil.
[Non-English content], Dame Therese. [Non-English content] , and good afternoon, everyone. When we announced Te Pae Hou - Our Future, in June, Air New Zealand's new strategic plan, we set out three strategic priorities. The first priority is putting customers first, providing safe, reliable, and punctual service for our customers, delivering unique Kiwi service and innovative products, and increasing customer reach and sales with smarter and more relevant offers. We have already rolled out simplified, granular, and airport-specific scheduling across our domestic and regional network, which means realistic turnaround times, and have invested in both tooling and procedures for our frontline teams. In combination, these are translating to significantly improved on-time performance. We are expanding this to our trans-Tasman, Pacific, and long-haul networks to further improve reliability and punctuality.
We are investing in our service proposition and our lounges grounded in our unique Kiwi hospitality. We are improving our disruption management and are continuing to modernize the way we market to our customers and how they buy from and interact with Air New Zealand. The second priority is targeted growth. This includes profitable network growth, transforming our loyalty program in line with industry-leading practice, and thoughtfully diversifying our revenue streams where opportunities exist. This means winning on key customer segments across our network, including inbound premium leisure customers on our long-haul markets, leisure and VFR customers on our short-haul network, and enterprise SME and corporate customers on our domestic routes. This priority leverages our new and retrofitted Boeing wide-body and Airbus narrow-body aircraft, which are fit for mission, as well as strengthening our alliance networks, transforming our loyalty program, and expanding flight adjacent revenue.
And third, resilient and future fit, removing cost and complexity, improving labor productivity, transforming engineering and maintenance, developing a financially sustainable regional network, unwinding the temporary inefficiencies created by fleet disruption, and delivering on our capital management metrics. I will now go through each of these in turn. The customer-first strategic initiatives we are putting in place are already delivering benefits for our customers. Our on-time performance increased from 77.5% in 2025 to 84% in the second half of 2026. Customer satisfaction increased from 83.6% to 84.5%, and controllable cancellations reduced from 2.2% to 1.3%. Pleasingly, on-time performance improved further in August, with 85.3% of flights arriving within 15 minutes of schedule, up from 83.1% in July and 81.8% for the same time last year. This is well above the global average for airline on-time performance, which was 73.1% in August.
These improvements matter to our customers, and they have been the result of detailed operational and resilience driven review of our schedule, a focused program of initiatives across our team, and the rollout of new digital tooling in support of operational communication and decision making. We continue to invest in this area with a goal of consistently being in the top five airlines in the world for reliable and punctual operations. Under our second strategic priority, targeted growth, the demand picture across the network in 2026 was mixed, but we are seeing solid inbound volumes. Across Asia, overall passenger growth was flat on reduced capacity, but with higher inbound passenger volumes and pleasingly strong load factors and improved revenue per ASK.
North America also delivered strong inbound volumes on slightly higher capacity, although outbound New Zealand sales remained soft, in particular reflecting the weak New Zealand dollar, resulting in flat passenger growth overall. Tasman and Pacific Island passenger volumes grew on strong capacity growth, supported by strong inbound volumes out of Australia. Passenger capacity and cargo volumes were impacted in the second half of the year across all international markets, with capacity lower than planned in the second half as we manage capacity and RASK to mitigate the surge in fuel prices. Domestic remains challenging. Passenger demand was down, and the New Zealand economy remained soft. We have been disciplined in matching capacity to demand and, where appropriate, using yield to respond to the higher fuel environment. More generally, we continue to see encouraging trend in product and cabin mix, with premium cabin revenue increasing by 14% and ancillary revenue by 12%.
Going forward, we are targeting sectors, destination, and target markets to deliver profitable growth. We have completed 11 out of 14 retrofits of our Boeing 787 fleet, and the new interior product is resonating very well with our customers. The remaining 787 fleet retrofit will be completed by November this year, and the 777 cabin retrofit will be completed in calendar year 2027. Lastly, resilient and future fit. We continue to make progress on things we can control and are accelerating the cost improvement at pace. In 2026, we delivered transformation initiatives generating an incremental NZD 94 million of EBITDA benefit. This has come from a broad range of initiatives. Further, we have now identified an additional NZD 135 million of annualized savings, including both direct and indirect costs, which will accrue from the 2027 financial year to improve our overall cost base and offset expected inflation.
In addition, we continue to work to build a financially sustainable regional network and deliver against our capital management metrics. It is well known that our operational and financial performance in the last few years has been hindered by our constrained fleet capacity due to the engine availability issues and resulting grounded aircraft. At the peak of the engine disruption, five of our 14 Boeing 787s and six of our Airbus A320s and A321neo aircraft were grounded. Almost 20% of our total jet fleet. This created disruptions for our customers, operational complexity, and significant financial cost. We have carried the fixed cost of aircraft, people, infrastructure, and systems, and we incurred additional costs through leased aircraft and engines to protect the network and schedule. While we received some compensation from engine partners, this was not enough to offset the financial costs incurred. Today, the picture is very different.
The last 787 was returned from long-term storage in June, an incredible milestone and a huge thank you to our teams around the business who persevered to make this happen sooner than expected. On the narrow body fleet, we expect the last of these to return to service during calendar year 2027. There are still residual risks to the availability through 2027. We are still carrying the cost of temporarily leased aircraft and engines in the system. It takes time to bring returning aircraft fully into the selling and operating schedule. We are in continuous discussions with both Rolls-Royce and Pratt & Whitney on extending compensation. While risk remains, the fundamental point is that the fleet constraint, which has shaped this airline over the last three years, is materially reducing, and the airline enters the 2027 financial year in a considerably more reliable fleet position.
This gives us more options around capacity, network deployment, and operating efficiency. A key decision we have taken is to smooth the aircraft investment profile in the near term and to bring it down medium term. Following the most recent delays of the two Boeing 787s from earlier this year to later this year and a quicker than expected return of grounded aircraft, we are in negotiations with Boeing to further rephase the delivery profile to smooth capital investment and realign fleet deliveries with our targeted capacity growth. In 2027 financial year, given the additional aircraft capital investment, we do expect to see incremental depreciation of between NZD 110 million -NZD 130 million compared to 2026. This depreciation profile will increase at a measured pace with the smoothing of aircraft CapEx investment. We want the right aircraft, but we also want them at the right time.
In closing, this has been another demanding year for Air New Zealand, and our people have continued to rise to the challenges we have faced. I am incredibly proud of the commitment, professionalism, and care they have shown for our customers and for each other. We have a lot of work to do to counter the impact of the fuel crisis. We enter the new financial year with a very clear strategy, a strong operation, and confidence in the future of Air New Zealand. Our customers remain at the heart of everything we do. We will continue to work hard to maintain and improve our operational performance while delivering the exceptional product and service experience our customers expect from Air New Zealand. We have one of the most valuable brands in New Zealand. We have the strongest loyalty program.
We are consistently ranked one of New Zealand's most attractive employers, and we are back to commanding strong customer preference. Thank you to those investors who have stuck with us over the last six years of crises and continue to support Air New Zealand during this current fuel crisis. It is worth reiterating that prior to the Middle East conflict, the airline would have expected in its central case to return to profitability in the 2027 financial year, controlling what we can control and reflecting the strong underlying improvements that we continue to deliver. Thank you. I will now hand back to Dame Therese to take questions on the 2026 performance and to chair the formal part of the meeting. [Non-English content] , thank you.
Thank you, Nikhil. I now open the meeting to any questions you may have that specifically pertain to the company's 2026 performance. Any general questions you may have will be addressed later on in the meetings. Can I just check if there are any questions online?
Yes, we have one question. Regarding the performance, I noted that some space could be looked into to save the cost. For example, some special seats with extra room at the front, besides the security door, are not being sold for extra money. This has been sold for extra cost in other airlines. Can the management look into such measures to make extra income and lower the cost?
Thank you for the question. When it comes to seat allocations and the sale of seats, we continue to optimize any ancillary revenue which comes from that piece of work, and our ancillary revenue has been growing year -on -year, and customers continue to enjoy the option to select the seat they prefer. As a key part of our strategy reset, we will continue to be looking at these types of questions as we go forward. It is constantly under review. Thank you. Are there any further questions?
No further questions on financial performance at this time. Thank you.
Okay. Many thanks. All right. We now come to the formal resolutions of the meeting. 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 directors, being Dean Bracewell and Laurissa Cooney, who both retire by rotation. There are also two resolutions on the election of two new directors, being Rob McDonald and Campbell Wilson. With respect to these two new directors for Air New Zealand, our constitution requires that directors are appointed by the board and then brought to the Annual Shareholders Meeting to retire and be re-elected at the next meeting. As already mentioned, voting on all the resolutions will be conducted today by poll. For all shareholders online, please click the Get a Voting Card button and follow the instructions on screen. Thank you.
The company secretary holds a record of the valid proxies and postal votes received in advance of the meeting. Before I put the resolutions to the meeting, you can see the results received of the voting directions given to proxies and the postal votes on the slide shown now. We will discuss and vote on each resolution in turn, and then MUFG Pension & Market Services will tally the votes at the end of the meeting. The first resolution relates to Dean Bracewell, re-election as a director. Dean has been with the board for a few years now and is also playing the important role as chair of our board Health, Safety, and Security Committee. Dean continues to be a very additive presence around the board table and continues to be a strong advocate, as he has been since he joined, of shareholder interests.
I support the re-election of Dean and now invite him to give his comments in relation to his re-election.
Thank you, Dame Therese. [Non-English content] . Dean Bracewell [Non-English content] . In addition to my role at Air New Zealand, I chair the board of Property for Industry Limited, and am a director of Northport Group Limited and Port of Tauranga Limited, where I also chair the board's Health and Safety Committee. I retired from the board of the Halberg Foundation during the past year. I have deep transport, logistics, and general commercial experience as outlined in the notice of meeting. This experience was gained over a long period of time, during which our operating environments ranged from good to extremely challenging and always highly competitive. At Air New Zealand, I sit on the board's People, Remuneration, and Diversity Committee, and I chair the board's Health, Safety, and Security Committee.
The governance work of these committees is core to the airline's strategy and its execution. The resilience shown by the Air New Zealand team as they have flexed the airline's operations to address the impacts of the Middle East crisis and engine availability issues, while improving service performance, has been commendable. The strategic reset to return the airline to profitability and to be able to deliver on our shareholders' expectations has my full support. I have now been on this board for just over six years. The extensive knowledge I have gained of Air New Zealand's business, its people, and its many stakeholders, when combined with the experience I bring, does, I believe, position me well with the appropriate attributes and experience to add value to the future performance of your company. As such, I ask for your support today to continue as a director of Air New Zealand. Thank you.
[Non-English content] , Dean. I move that Dean Bracewell is re-elected as a director of the company. Are there any questions from online participants?
No, there are not.
Thank you. No questions have been received. On your voting form under resolution one to re-elect Dean Bracewell, please tick the box either for, against, or abstain. Thank you. Our next resolution is in relation to the re-election of Laurissa Cooney as a director. Laurissa has been on the board of Air New Zealand for around seven years. She chairs our People and Remuneration and Diversity Committee, and brings many strengths to the Air New Zealand board, including living in regional New Zealand, being a very significant and learned person around sustainability, which brings a lot of insights into the boardroom, as well as being iwi-affiliated and a person who has been in a CFO role and provides many financial insights. I support the re-election of Laurissa and invite her to provide some comments in relation to her re-election. Thank you.
[Non-English content] . I am Laurissa, and my iwi connections whakapapa to the Whanganui River, and I currently reside in the sunny Bay of Plenty region. It is a pleasure to be able to address our shareholders today, and I thank you for your time. By way of background, I joined the board in 2019, and given this will be my final term on the board, I will work with the chair over the coming year to ensure that the timing of my retirement supports a smooth transition from the board at the appropriate time. Over these years, I have developed a deep understanding of Air New Zealand, its history, its people, its customers, and importantly, the challenge and opportunities that come with operating in a constantly changing environment.
I would value the opportunity to use this experience to help guide the company through its next chapter and to support the board and management team in delivering on our Te Pae Hou strategy. I am also proud to chair the People, REM, and Culture Committee. Strategy ultimately comes to life through people, having the right capability, leadership, culture, incentives, and the environment to enable our people to perform at their best. In addition to my extensive governance experience with Air New Zealand, I am also an independent director for listed entity Goodman Property, Netherlands-owned Rabobank, and EQT-owned Metlifecare, and a steering committee member for the Institute of Directors, Chapter Zero network. I am an active member of the Institute of Directors with a chartered member status, and I am a Fellow of the Chartered Accountants Australia and New Zealand, and previously held a chief financial officer role.
This has given me a strong grounding in financial reporting, audit, risk, and commercial decision-making. I would like to thank our passionate, talented, and dedicated team for the work they are doing to build a strong, successful national airline that continues to connect New Zealanders to each other and the world. There is still a lot of hard work ahead of us in FY 2027, but we are starting from a better place. More aircraft are available, maintenance costs are coming down, and the changes we have made across the airline will start to deliver more benefit. Fuel prices remain a challenge, but we have a stronger operation, a clear strategy, and real momentum to build upon. I am deeply committed to working on your behalf to achieve the best possible outcomes for your incredibly special company. Thank you for your time. [Non-English content] .
[Non-English content] , Laurissa. I move that Laurissa Cooney is re-elected as a director of the company. Are there any questions from online participants?
No, there are not.
Thank you. No questions have been received. So on your voting form under resolution two to re-elect Laurissa Cooney, please tick the box either for, against, or abstain. Thank you. Our next resolution is in relation to the election of Rob McDonald as director. I've already commented on Rob's candidacy as a director of Air New Zealand earlier in my comments. But as a former CFO of Air New Zealand and now an experienced governor, I believe he will add much value to our future strategy and support his election today. I will now invite Rob to give his comments in relation to his election.
Thank you, Dame Therese. [Non-English content] . Good afternoon, everyone. My name is Rob McDonald. It is a pleasure and a privilege to be standing for election to the Air New Zealand board. Some of you will be aware I've had a long association with this company as an employee for over 25 years, including 14 years as Chief Financial Officer. During that time, I certainly experienced the ups and downs of the airline industry, perhaps best illustrated by the fact the U.S. dollar price of crude oil fluctuated between $10 and $145 over that period. I certainly had my share of industry and company crises over that 25 years. You develop resilience in this challenging and complex but exciting industry.
I have a great deal of empathy for the people at Air New Zealand over the COVID years and ensuing engine availability challenges. I left the airline a little more than eight years ago to embark on a governance career. I stepped down from the board of Contact Energy last week, having been a director for the last 11 years and chair for the last eight years. I am the chair of the Suncorp New Zealand companies and a director of ASX-listed FleetPartners. I am also pro-chancellor of the University of Auckland. I am very conscious, firstly, as a longstanding executive and secondly, as an experienced director, of the role of the board and the role of management and the governance-management boundary. In practice, that means respecting management's mandate to run the business day to day while ensuring the board holds it robustly to account on strategy, risk, and performance.
It is an understatement to say that COVID and engine availability have not been kind to Air New Zealand. Further, the failure of successive governments to have any meaningful economic regulation of airports is coming home to roost. The financial challenge in front of the company cannot be minimized. I believe I bring to the board industry experience, together with extensive accumulated senior executive and governance experience to confront these challenges. I am careful to organize my commitments to ensure I have the capacity to do full justice to a role at Air New Zealand. I fully understand the need for Air New Zealand to be financially sustainable. Air New Zealand is unique by world standards. It is unthinkable to imagine New Zealand without a national flag carrier. Many countries around the world no longer have one.
Air New Zealand needs to be successful for its customers, its employees, its shareholders, and for New Zealand. But success is not preordained. It takes ambition, hard work, and bold decisions. I would be grateful for your support. Thank you for your consideration.
[Non-English content] , Rob. I move that Robert McDonald is elected as a director of the company. Are there any questions from online participants?
No, there are not.
No questions have been received. Therefore, if I can direct you on your voting form under resolution three to the item, "Elect Robert McDonald," please tick the box either for, against, or abstain. Thank you. Our next resolution is in relation to the election of Campbell Wilson as a director. I have made some earlier comments about Campbell's candidacy as a director in Air New Zealand's board. Campbell, his whole career has been spent in aviation, and much of it in senior roles leading airlines in Asia. I believe that he would add enormous value to Air New Zealand in that capacity and support his election. I will now invite Campbell to give his comments in relation to his election.
Thank you, Therese. [Non-English content] . My name is Campbell Wilson, born and bred in Christchurch and a University of Canterbury alumni. I have 30 years experience in the aviation industry, the bulk of which was with Singapore Airlines, where I rose from a management trainee here in Auckland through various roles in the Singapore head office, including revenue management, network planning, sales and distribution, as well as a number of leadership positions in Australia, Canada, Hong Kong, and Japan. I ultimately became the first foreign recruit to be appointed to Singapore Airlines' Senior Executive Committee. Of those 30 years in aviation, I have spent almost 12 as an airline CEO.
Seven years as the founding CEO of Singapore Airlines' low-cost airline, Scoot, which together with a great team, we took from an Excel spreadsheet to a fleet of nearly 70 aircraft operating from Singapore to Europe, Australia, China, Japan, and many places between. Then 4.5 years as the CEO of the Air India Group following its privatization from a long period of government ownership. During this time, I have overseen comprehensive transformation of systems, processes, operations, workforce, fleet, product, and customer experience, as well as the merger of four airlines and significant fleet and network expansion. The Air India Group now comprises nearly 30,000 employees, a fleet of nearly 300 aircraft, and annual revenues of around NZD 15 billion.
Beyond executive roles, I have been on the board of directors of the International Air Transport Association, or IATA, the executive committees of the Star Alliance and of the Association of Asia Pacific Airlines, as well as the boards of a number of full-service and low-cost airlines in Singapore, Thailand, and India. As a longtime airline executive, I have navigated my fair share of impactful events, ranging from the Asian financial crisis of the 90s to 9/11, the Ansett Australia collapse, SARS, the second Gulf War, the global financial crisis, COVID and its lingering effects on supply chains, and of course, most recently, the multiple geographical conflicts and their significant effects on airspace and jet fuel prices. I am acutely aware of the many critical roles airlines play, the myriad stakeholders we serve, the responsibilities we carry, and the high expectations placed in us.
As a proud New Zealander, I am very much aware of what Air New Zealand means to this country, and so the prospect of contributing to my national airline means a great deal to me. I look forward to the opportunity to serve on your board. Thank you.
[Non-English content] , Campbell. I move that Campbell Wilson is elected as a director of the company. Are there any questions from online participants?
We have one question from Jordan Taylor. They ask, has Campbell Wilson's performance at Air India been considered?
Yes, absolutely. As part of a normal process in relation to the appointment of any director and putting a director up for election, there is a due diligence process that is undertaken. It includes reference checking and a review of previous work, and that has been undertaken in relation to Campbell. He has strong experience in Asia, which is one of our key markets. We think his myriad of experience in Asia, including his time at Air India, but also in other airlines, is going to be incredibly helpful to us moving forward. Yes, Campbell's experience has all been taken into account when we put him forward for election. Thank you. Are there any further questions?
No further questions have been received, so I will ask you to turn to your voting form under resolution four to elect Campbell Wilson, and please tick the box either for, against, or abstain. Thank you. Have all who wish to vote done so? Shareholders participating via the virtual meeting website should now submit their votes through the MUFG online platform. Voting will be open until the close of the meeting. The results will be announced to the NZX and ASX after the conclusion of the meeting. I now welcome you to watch the following video before we proceed to general business.
[Non-English content] . I 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 meeting up to any other questions you may have. Can I please just ask that we use this time to focus on questions relating to matters that are relevant to the airline? If you have any customer-related matters that you would like to address, please email these to us at investors@airnz.co.nz. While we wait for questions to come through online, I will address some of the questions we received prior to the meeting.
The first question is in relation to the jet fuel price, which has been spiking, and just asking what levers the airline have to play with to ensure that it can mitigate any adverse impacts or minimize those adverse impacts. I think as both Nikhil and I have discussed in our speeches today, there are a number of levers that can be pulled in relation to capacity, in relation to fares, in relation to making sure that we're controlling our own costs, indirect and direct, as well as we possibly can. But I think there's no doubt that the elevated jet fuel prices are having an impact on our financial performance and our level of profitability. At this stage, we are recovering circa a third of that price increase in fuel.
We're going to keep working at that, and there may be further reviews going forward in response to elevated fuel prices. There is another question that has come through. "Why do you insist on paying bonuses when the company is losing money and shareholders are not receiving any dividends? If the company is not making profits, don't lose more money by paying bonuses." I'd just like to acknowledge the absence of dividends this year. I myself have a significant shareholding at Air New Zealand. We do feel that very acutely. We have a capital management framework by which we consider declaring dividends. But given the financial loss this year, we've elected not to pay an ordinary dividend in line with that framework.
This year, the board exercised its discretion to not pay any bonuses or what we would call short-term incentives. This was in light of the company's financial performance, the constrained fiscal environment, and the elevated fuel prices that we've been discussing throughout the meeting, and for the reason that you outline, which is a need to maintain an alignment between remuneration outcomes for our staff and shareholder outcomes. Thank you. Are there any further questions, Julia?
We have a further question online.
Thank you.
I have noted that the cabin crew on Air New Zealand flights do not appear as warm or welcoming as those of other airlines, such as Air Canada. In addition, the seats are smaller than those of other airlines. All these factors are causing Air New Zealand's ranking to decline. When passengers have a choice, they will choose other airlines. I do notice that the ticket prices are low, but a lower price does not necessarily attract passengers. Is it the quality of service that attracts people to choose an airline? How do we improve this?
Thank you for the question. We monitor the views of our customers closely and regularly, and I am really proud that our customer feedback and our customer standing has been improving over the last couple of years. We are actually at a really high level today. I think, though, that is always a personal view, and I understand that perhaps that is your view. But the data that we have coming through to the board would tell us that we are heading in a really positive direction, and we are extremely proud of our cabin crew and this long tradition of unique Kiwi service. We often get feedback that when people board an Air New Zealand aircraft and meet our cabin crew, how they feel like they are coming home, or they feel that sense of home, and that is just part of our unique offering.
We are always looking to fine-tune our service offering, and we have got a lot of refreshment of things coming forward, whether that be uniforms, menus, options to sleep, et cetera. There is a lot coming our way, which is pretty exciting moving forward. Some of you may have flown on our new aircraft, which have a new fit-out inside, and we are working through our wide-bodied fleet, both 787s and 777s, to make sure the fleet is consistent and modern as part of our new product, which we believe is an excellent product. So, thank you for the question. Are there any further questions? I can go to another one here. Just that our CEO recently spoke about our fleet status, and just wondering, when does the airline expect to have all of its airframes back in the air?
As I think we mentioned earlier in the meeting, we have significantly improved our position. So we have gone from being at somewhere between zero to one in terms of wide-bodies at the moment. I think today we are at zero aircraft on the ground for wide-bodies. For our narrow bodies, A320, A321s, we are at one today. Those are significant reductions on FY 2026. So a significant improvement, which we are really pleased about. Are there any further questions online?
We have a further question online. Air New Zealand has invested significant attention and capital in battery electric aircraft, despite current batteries being unsuitable for most passenger operations. What ROIC does the board expect? With NZ now reliant on imported jet fuel, rising costs and geopolitical risk, is sufficient focus being given to energy security, including domestic refining, larger strategic reserves, or allied supply agreements that may not be reliable in a severe crisis?
Thank you for the question. I think firstly to say that we have not invested significant capital in electric aircraft or demonstrator aircraft. We did complete a four-month technology demonstrator program with BETA Technologies in 2026. But the objective of that trial was really to build our understanding of how these things might work, the operations, infrastructure, et cetera, that might be required. It is important for our future decarbonization that we understand what is happening globally and what the options are that may be available to us over time. We have completed that program, and we do not have any future plans in relation to the purchase or use of those aircraft as we stand today. But it is certainly something we understand a little better now. Security of supply of jet fuel has certainly been a very topical issue given the Middle East crisis. Today, thankfully, supply feels reasonably secure.
Pricing is the issue that we are mostly concerned with. As a result, we are in extremely close contact with the ecosystem in relation to fuel supply, including the government, the fuel suppliers themselves, and as I said, we are in a good position today, and we will continue to keep that intensely under review. Thank you.
We have a further question online from Ricky Manurangi. "The New Zealand Shareholders' Association notes that Robert McDonald served as Air New Zealand CFO for 13 years until 2017. Does the board consider this a potential independence issue under the NZX Corporate Governance Code, and how has it satisfied itself that Robert remains independent?" Thank you.
Thank you for the question. The board has considered Rob McDonald's independence and has determined that he is independent as a director. I would just like to note that it has been close to a decade since Rob was involved in Air New Zealand, and I think that is sufficient time from our perspective to allow independent thinking to come into the boardroom. Also noting he has been involved with a number of other organizations in his governance career, which allow for further experiences and insights to be brought back to the Air New Zealand boardroom. So we are comfortable with his status as an independent director. Thank you. I might move to another question that was put through, which is around the CEO leading a strategic review to reset the business, and when shareholders can expect a concrete timeline and specific targets out of that.
I'd just like to say that Nikhil, when he became the Chief Executive Officer, did run a very comprehensive process to reset the strategy, including thousands of Air New Zealanders. That strategy has been endorsed by the board. When we think about what that means for us, it creates a lot of internal ambition. At the moment, we're really focused on this Middle East crisis issue, but we will be engaging investors over time to give some more color to what you should expect to see as a result of that strategy being implemented. Thank you. Another online question?
Thank you. We have received another question from Ricky Manurangi. The New Zealand Shareholders' Association notes the balance sheet comments made. However, more specifically, net debt -to -EBITDA rose to 3.8 x, above the 1.5x- 2.5 x target. With Moody's outlook negative, capital commitments stand at NZD 3 billion and no financial year 2027 guidance is provided. Can you outline specific actions that will restore investment-grade metrics and how these commitments will be funded without further equity raise or asset sales?
Thank you for the question. I'll just make a couple of quick comments, and then I'll hand over to our Chief Financial Officer, Kris Cudmore, to provide a little more color. I think the key thing to note is that we do have an investment-grade rating as we stand here today. Obviously, our metrics have been impacted significantly by the decrease in EBITDA. We've talked about that extensively throughout the meeting, how the jet fuel crisis and other factors have impacted our profitability. Our net debt was relatively flat in the second half, despite the impact of the fuel crisis on earnings. We're really focused now on what's coming up in terms of OpEx and CapEx and how we can improve our underlying earnings.
There's a real focus on the underlying business here, notwithstanding the impact of these fuel prices, and just making sure that we're continuing to improve that. Kris, perhaps you'd like to provide a little more color. Thank you.
Thank you, Dame Therese. You've covered most of it as it happens. The key steps that we're going to take to move back within the sort of metrics that would be consistent with investment grade over the medium to long term are by taking down CapEx. We've put that in our annual results presentation, sort of a smoothing of CapEx. We're smoothing our aircraft deliveries, as Nikhil talked about, and we're in negotiations on the exact timing of that with Boeing. The second piece is we're looking to increase our profitability very substantially over time, which is sort of the other part of that metric.
On top of the sort of actions and programs that Nikhil's talked about, as we've promised investors, we're going to have a larger discussion of our future business improvements and what that looks like for the business in terms of KPIs and structural profit improvements over the next number of years. We'll do that at an investor update later this financial year. Thank you.
[Non-English content] . Thank you, Kris. I'll now move to another question that's been provided in advance. Campbell Wilson, who leads Air India as CEO, is coming on board. I think that's begged the question, will we be flying to India, and/or Thailand? In relation to both of those destinations, I can confirm that they are within the consideration set that we're looking at. We have always got a consideration set of long-haul routes that we're looking at. When you think about the new aircraft that we are having delivered shortly and will come in over the next few years, it provides an opportunity to think about additional destinations. However, at the moment, we're focused on dealing with the fuel crisis. Nothing's imminent, but there's certainly work to be done, and it continues to be under review. Thank you. The next question relates to the same topic.
Any update, please, on the return to London, the when, and the via where? Thanks. I think the answer is very similar to the previous one, which is that we review our network regularly. London remains within that consideration set. The latest activity that we've been doing around wide-body services and launching new services has been from Christchurch. Nikhil, our CEO, announced earlier this year that we'll be commencing shortly services from Christchurch through to Perth, Singapore, and Tokyo. Those services are our immediate focus. Dealing with the fuel crisis is also our immediate focus. We're not looking to operate London anytime soon. We will continue to review and optimize the network. Thank you.
Thank you. We have a further question online from Ricky Manurangi, representing the New Zealand Shareholders' Association. He says that they prefer a hybrid meeting, noting that 70% of NZX companies now hold these, and shareholders view hybrid costs as a good cost. Given the airline's focus on rebuilding trust, will the board commit to a hybrid ASM meeting in 2027?
Look, I think we are all a fan of a hybrid meeting, and the reason is very specific for holding a virtual meeting only this time. We will review that again next year. We understand the desire for a hybrid meeting, and we will keep that under review. This is for a specific set of circumstances, and I think there is both a cost and a focus issue in terms of time at the moment. But very keen to engage with our shareholders and looking forward to doing that again in the future. Thank you. Perhaps if I move to one of the other pre-prepared questions, which is around when will Air New Zealand start making healthy earnings again, and will it delay dividend payments for three to four years? I think in relation to that question, cannot answer that right now.
We have no guidance in the market at the moment. As Nikhil said earlier, 2027 was expected to be a year of recoverability and entering back into profitability following our engine availability and aircraft on the ground issues. However, the fuel crisis has superseded that. We have not provided any guidance to the market at the moment. What I can tell you is that we are working to control what we can control in terms of our own costs within the business. We are continuing to advocate for some control around aviation ecosystem costs, and we are looking to manage the jet fuel crisis as well as possible so we can return to profitability as soon as possible and allow for shareholder returns to commence. Okay. Any more questions online, please, Julia?
Yes, we have received one question from Eva Quidling, directed to Mr. Bracewell. What three issues stood out for you as the health and safety and security committee during the past year?
Thank you. Dean, I'll hand that question to you.
Thank you very much. The three issues. Well, firstly, one of them is probably not an issue, but the first thing that stood out the most is the strong and healthy safety culture within the airline. We test this from a governance level by engaging with our frontline workforce. We invite health and safety reps to the boardroom to sit in with us in meetings. We visit sites around the country and offshore and talk with local teams and our outsource providers. Universally, the culture of safety first is very, very strong with this airline. Not an issue, but I think it's one of the most important features of health and safety within the airline. Another feature, health and safety, which is not lost on us, is what's happening around the globe.
Recently, we've had increased issues on airfields, if you like, with incidents, particularly in Sydney and over in the U.S. We've been watching those very closely. The third point I'd make is the increased weather incidents, the extreme weather that's happening around the globe. Our flight operations team do a very good job of monitoring weather events while our aircraft are in flight and communicating those with our pilots whilst in the air. But it is fair to say that weather turbulence and related weather issues is increasing. Thank you.
Thank you. I've got another question that was provided in advance, which is, what is the true cost of full potential? Full potential refers to our operating model and how we work. We introduced this a number of years ago. We're the first airline in the world, actually, to introduce it, and we're seeing great improvements in terms of speed of delivery, working across the business rather than functionally. It is quite hard to put a true cost on that. All I would say is that there are significant benefits coming to the airline , and to me, that's the key thing, is that those benefits are emerging and are flowing. It particularly has a significant impact in terms of the digitization of the airline and allowing digital resources to be allocated across tribes, across the organization. I think that's a summary of our full potential working model.
Nikhil, was there anything you would like to add to that?
Just that labor cost management has been one of the strong points of the airline as we have managed these multiple crises. Not only is the airline delivering a lot more capability as far as the underlying performance of the airline is concerned, we are also doing that with a lot less headcount. Recently, we have had to go through another round of restructure as one of the mitigating actions we have taken to deal with the fuel crisis. The rate of change delivery across the airline has not slowed down, so we should take a lot of confidence from that.
Thank you. Another online question?
Our next question online is directed to Mr. Campbell Wilson. What two aspects would you say Air New Zealand can learn from Singapore Airlines?
Over to you, Campbell. Thank you.
I think first thing I would like to say is that they are very different airlines. Air New Zealand is representing New Zealand and carrying people to and from New Zealand. Singapore Airlines represents Singapore and carries people not just to and from Singapore, but also through Singapore en route to other parts of the globe. What I think any airline that aspires to be world-class must have is operational consistency and execution consistency.
I think Air New Zealand, the progress that has been articulated earlier in the session on OTP and improvement in its operational delivery, is clearly demonstrating consistent to that. Customer experience, making sure that customers experience what they expect to experience, is also obviously something that denotes a world-class airline. Air New Zealand is renowned for that level of service, but also the improvements that Air New Zealand has seen in its net promoter score clearly indicate that it is moving in that right direction. Finally, I think representing the country and being agile in ensuring that network and product and investment and continued improvement in product remains throughout the business cycle, so that reputation is maintained and customers' expectations continue to be delivered.
Those are the three things that I would think that reflect any world-class airline, and I think Air New Zealand clearly is a world-class airline in just the same category as Singapore Airlines.
Thank you, Campbell. Next question online.
Our next question comes from Nick. As more airlines flying to New Zealand, the competition has been stronger than ever before. What is Air New Zealand's strategy regarding competition?
Thank you. I think I will pass that question to our chief executive.
Thank you, Dame Therese. You are right. Aviation and aviation in New Zealand is highly competitive. What Air New Zealand brings to the table is quite a differentiated offering, and our customers really appreciate that. A lot of focus for us has gone into ensuring that we have a world-class product that we can take to market. 11 out of our 14 787s have now been retrofitted, and the customer feedback on that new product has been very positive. All our 777s will have new product by the end of calendar year 2027. That is a very strong baseline to start from. As Campbell just mentioned, to stay competitive in the airline industry, we have got to do the basics right. For us, basics involve being reliable and punctual for our customers.
Being in the top five airlines globally is our aspiration, and we want to do that consistently. We are delivering that day in and day out, and very proud of what the team have achieved on that front. The thing that is not replicable by any other airline is our very unique Kiwi hospitality that we provide when our customers travel on our aircraft. That is not something we take for granted. We have had a lot of new cabin crew join our ranks since COVID, and we are putting a significant amount of focus in place to retrain and to provide refreshed training and support to ensure that our cabin crew can support our customers on every journey. We have a very strong loyalty base, as Dame Therese mentioned, 5.5 million loyalty members in a country our size.
That is a really strong foundation, again, for us to build on, and making sure that we continue to support and look after our loyalty members is very high on the agenda. We have got some very strong plans to ensure that we stay at the forefront of the products and services we take to market. That allows us to compete successfully against all sorts of competition that we see here in New Zealand and around the world.
Thank you, Nikhil. Next question online.
Our next question also comes from New Zealand Shareholders' Association. They note they have previously encouraged Air New Zealand to participate in the Institute of Directors' Future Directors program, as we expect of NZX 50 companies. Will the board consider this position to help develop the next generation of directors?
Thank you for the question. It's not a position that we have taken. It's just simply a series of circumstances. We have a lot of governance change occurring this year, and we also have some intense governance issues to deal with. We will keep that under review for the right time. Certainly think it's a great program, and for Air New Zealand to be part of it at some time, at the right time, would be fantastic. Next question. Thank you.
Thank you. Our next question from the New Zealand Shareholders' Association, notes that Dame Therese Walsh has indicated her next term as chair will be her last. Can the board provide an update to shareholders on the chair succession process?
Thank you for the question. Yes, it is my final term. We have been undertaking chair succession regularly, and for some time. I will not go into any more detail than that, other than to note that it is a very active discussion, and we have a number of excellent candidates on our board who could become the future chair. Thank you. Next question.
Thank you. Our next question is from Neil Patchithally. Can someone please tell us just what has happened with the engine suppliers to finally improve the situation of engine availability?
Thank you. I will pass that question on to Nikhil, our CEO. Thank you.
Thank you. It is a combination of things. The engine manufacturers and their research and development teams have done a lot of work in trying to find the solution to the issues that have led to these engine troubles. Both Pratt & Whitney and Rolls-Royce have made significant progress in resolving the root cause issues. Both of those engine manufacturers have also invested quite a bit in increasing the capacity of engines that they produce, both for new aircraft but also to support the fleet that is already flying. Coming out of COVID, the supply situation from those engine manufacturers was very constrained, and they have done a lot of work to unlock that. Equally, there is a lot of work that has been done on the Air New Zealand side.
We've been involved in long, protracted negotiations with our engine partners, and we've made some breakthroughs over the last few months, which has helped improve our engine position. We've continued to invest in the Christchurch Engine Centre, which now will also support the Pratt & Whitney PW1100G engines, the same engines that we've had issues with, so that we can actually, as Air New Zealand and New Zealand, can be part of the solution to this problem, this global problem, by actually using our talented folk here in NZ to try and fix those engines at a much faster rate. A number of things have gone into actually improving our engine position.
Thank you, Nikhil. Next question.
Thank you. Your next question comes from Ricky Manurangi. The People, Remuneration, and Diversity Committee suspended the 2026 short-term incentive despite three measures hitting the target. CEO termination terms remain undisclosed, as the NZD 751,000 notice payment highlighted. Will the board commit to disclosing severance terms and a minimum financial threshold before any 2027 STI is paid?
Thank you for the question. I'll just note, as we discussed before, that the board did make the decision to suspend the 2026 STI because of the financial performance of the company and in alignment with shareholder returns. I think we've covered that piece. Generally, we've been reviewing our short and long-term incentive schemes to ensure alignment with the new strategy, Our Future. In relation to that framework, I might just hand that question to the chair of our People, Remuneration, and Diversity Committee to give you some further insights. Thank you, Laurissa.
Thanks, Therese. We have recently reviewed our short and long-term incentive framework because it is very important to us that the principles of the incentive framework align with shareholder value, so that we are rewarding executives for creating long-term value, that we also attract and retain exceptional executives as well. So we have considered that as a key principle, and we reward exceptional performance. Focusing on that retention justifies having the LTIP, but performance justifies it vesting. The framework remains broadly consistent with prior year, but we believe that to better incentivize management and executives to drive the improved performance that we need, that these three principles will help with that, and you will see more detail on that in the future. Thank you.
Thanks, Laurissa. Next question.
Thank you. Your next question comes from Stephen Mayne. Will we put up a remuneration report resolution next year, like is required in Australia, especially given we are listed on the ASX?
Thank you for the question. We constantly review our remuneration disclosures to ensure we are giving our shareholders visibility of what is happening. But we do not currently have plans to put up remuneration reports to voting as is the case in Australia. Thank you.
Thank you. Your next question also comes from Stephen Mayne. Which recruitment firm assisted with sourcing the new directors, Robert and Campbell? Did either candidate know any of our directors before engaging with the recruitment process? How many candidates did the board fully assess?
Thank you for the question. I will just keep the name of the recruitment firm confidential, but we do use recruitment firms across director appointments, and we do consider numerous candidates at the board level based on advice, based on our own knowledge, before considering candidates that we would put forward to the ASM for voting. Most important in that is looking at the skills matrix. As you recall, I mentioned that last year. We had one aviation expert on the board. We wanted to add to that to get to two aviation experts on the board, and that is what we have put forward at this meeting today. We have been lucky to find two aviation experts who are both New Zealanders, and that is a fantastic outcome. Thank you. Next question.
Thank you. Your next question online comes from Ricky Manurangi regarding sustainability, and in particular SAF, Sustainable Aviation Fuel. Output fell from 1.7% to 1.2% in FY 2026 with no 2030 SAF volume contractually secured via executed offtake agreements. SAF is expected to deliver 40%-67% of 2050 reductions. What firm milestones and offtake commitments will the board require before shareholders can have confidence in the 10% by 2030 ambition?
Yes. Clearly, we know that SAF uplift decreased in FY 2026, and there are a couple of things in there. I think, one, we are obviously under enormous cost pressure. Secondly, I think it is important to note for anyone that does not understand this, that several countries that we fly into, our global ports, require us to hold a certain level of Sustainable Aviation Fuel in order to land there. So there is a minimum level of Sustainable Aviation Fuel that we require to be able to fly into those ports. In relation to our targets, our target for 2030, it is not a linear target, and so each year will be different. That is why we have our framework of providing continual guidance. But I will just ask our Chief Sustainability and Corporate Affairs Officer, Kiri Hannifin, to provide some additional comments. Thank you.
Thank you, Dame Therese, and thank you for the question. As Dame Therese said, the 2030 ambition of 10% SAF still remains. We have been very clear that that is highly contingent on a number of factors, including the scaling of the market, price and cost, and government policy to support internationally. It is contingent. In terms of SAF uptake on a year-by-year basis, that ebbs and flows as well. We are particularly mindful of the cost environment that we are navigating as an airline. What I can say on the positive front is this year, our SAF program at Air New Zealand has evolved quite significantly, including for the first time, beginning to sell SAF certificates. We have had a number of sales both here in New Zealand and internationally, which allows us to recover the cost of the SAF we are purchasing.
Which is the plan for FY 2027, whereby we purchase SAF that we can sell to protect the financial outlook for the company.
Many thanks, Kiri. [Non-English content] . Next question.
Thank you. Your next question online comes from Dr. Thor Swisshelm. Can you guarantee that the predicted cost savings will not be customer-facing, impacting the customer experience, given that Air New Zealand is positioning itself as a premium, and certainly a premium-priced carrier. Also given its recent drop in global rankings, Skytrax.
Thank you. While we are highly focused on costs, we do have a strategic imperative to put the customer first. While that starts with safety, it also comes with this ambition and delivery standards that we have today around our unique Kiwi service and product. As I mentioned earlier in the meeting, the customer feedback that we are receiving is at an extremely positive, favorable level, and it continues to improve. You combine that with modern marketing, sales, and distribution. We will continue to invest as we have been. I outlined some things earlier in the meeting around uniforms and food and beverage, et cetera, that we continue to enhance and improve over time. We have also invested in an automated rebooking system, which is providing massive efficiencies both for us and for our customers.
What would have taken hours is now down to under 20 minutes in terms of a disrupted flight. We will always continue to invest in the customer experience. We will always continue to uphold the customer experience as something that we hold dearly in terms of providing that premium level of service. I am not going to give a specific guarantee on any particular cost because we continue to review the whole proposition in its entirety over time. Thanks for the question. Next question.
Thank you. Your next question comes from Tong Chi Hak. Sorry, just one moment. Sorry, we will just find the next question while we try and recover that one. Apologies. One moment. Your next question comes from Eva Quidling. Please provide an update on any progress or new development in the past financial year regarding Mangōpare Air New Zealand Pilot Cadetship. Thank you.
Thank you. I am just going to ask our Chief Safety Officer, Nathan McGraw, to provide an update on the cadet scheme. Thank you, Nathan.
Thank you, Dame Therese. [Non-English content] , everyone. The Mangōpare cadetship program becomes or continues to be really important for us as a pathway for pilots to join Air New Zealand. We are delighted to have our current cadets in various stages of the training, and some are coming towards the end of that simulator training and will be joining the airline and flying our airplanes very soon. It is something that we continue to look at, and we will look at the next phase of that program as well. But for the moment, we have got a number of candidates that are going through the program and will be joining our fleets very soon. Thank you.
[Non-English content] , Nathan. Thank you. Next question.
Thank you, and apologies, we have recovered the prior question from Tong Chi Hak . What financial targets has the board set for the next three to five years for revenue growth, operating margins, free cash flow, leverage, and return on invested capital? What assumptions about passenger demand, fuel prices, exchange rates, and fleet capacity underpin those targets?
Thank you very much for the question. Obviously, our view on the financial progress of Air New Zealand is related to the new strategy that has been implemented, is in the process of being implemented, and it was announced on 30 June. We have provided the market with some information around that. I think that further information around the financial targets will come out as we engage with investors over the course of FY 2027, and I think the team are looking to hold an Investor Day in that regard. However, I would just note that while we continue to be outside of many of our metrics in our capital framework, we still hold that capital framework as it stands today. Secondly, some of these metrics are tricky given the current volatility in jet fuel prices.
That continues to be a real-time today issue that is affecting us until such time as it is not, and we do not know when that will be. So, a very difficult set of circumstances, which mean that we cannot answer that question in great detail today, but thank you. Next question.
Thank you. Your next question comes from Warwick Gould. Does General Electric still produce jet engines like they did in the early 1980s? If so, would the airline consider using them?
Thank you. I am not sure what the early 1980s looked like, but I will ask Nikhil, our CEO, if he has any insights.
General Electric certainly do continue to produce jet engines. We fly their GE90 engine on our 777 fleet. As of November, December timeframe, we will be taking delivery of our two new 787 aircraft, which have their brand-new GEnx engines installed on them. So we have a long-standing relationship with GE, and that will continue into the future.
Thank you. A number of people from Air New Zealand visited GE just recently to continue that relationship. Next question. Thank you.
Thank you. Your next question comes from Peter Demouge. Over the last 20 years, I have noticed an absolute downgrade in the professionalism, smartness, grooming of cabin crew compared with a lot of other international airlines, especially the larger Asian airlines, which make travel a special experience rather than feeling like I am on a troop carrier with broken and older aircraft. Will this be remedied with a higher expectation in the future?
Thank you so much for the question. I have covered some of this earlier in the meeting just in relation to the very high levels of feedback we receive from customers, and that that feedback is extremely positive and continues to become more positive over time. We have also talked about our aircraft being retrofitted or fitted with our new layout, which is also going extremely well and is still in progress. But I will ask Kate Boyer, our Chief Operating Officer, to provide a few additional comments. Thank you.
Thank you, Dame Therese. I just want to reiterate that our cabin crew are some of our best ambassadors for Air New Zealand. The warmth and hospitality and that uniquely Kiwi service that they bring truly sets apart the experience of being on our aircraft. That is true not just for Kiwis, but also for tourists coming to the country and experiencing New Zealand for the first time. We do hold our crew to a very high standard, and we continue to enforce that standard and provide a lot of training and investment in that space. However, we are really proud as an airline that our crew are able to express themselves, be who they are, and show up as their unique identity in the workplace.
Thank you, Kate. Appreciate it.
Thank you. Your next question comes from Ray Western. When will Cookie Time cookies return to domestic routes?
Thank you for the question. It is an important one to many Kiwis. I will just say that as a Kiwi who travels every single week on our airline, that the Cookie Time cookie is frequently offered as part of our in-flight service. We know that it is well-loved by some of our customers. But it is part of a suite of products that we offer, and we work with a number of suppliers to provide a variety of food items on our flights. You will get some variety, and everyone has a specific preference. We try and capture those preferences and work with those. Are there any further questions?
Thank you. We have no further questions at this time.
Okay. Thank you. There are no further questions. There is no doubt we are operating in a volatile environment. I think we have spoken about that a lot today, and we certainly have more work to do. But we do enter this new financial year with a clear strategy, a stronger operation, and confidence in the future of Air New Zealand. Thank you for attending today's meeting. I now declare the meeting closed at 3:38 P.M. [Non-English content] .