Air New Zealand

AGIFORS 2003New York

May 27th-30th 2003

Agenda• Introduction

• Update since Cancun - major airline activities•Events up to August 01

•September 01

•Post September 01

• NZ Express a winner

• Substantial improvement in NZ financial position

• Optimisation tools assist in new crew contracts

• NZ/QF commercial alliance

• War in IRAQ and now the SARS virus

Introduction

• Started with Air New Zealand 5 and 1/2 years ago based in Auckland

• Commenced as Finance Manager within Sales and Distribution responsible for finance and performance management analysis and reporting

• Moved with my family to Melbourne, Australia in June 01 working for Ansett Australia in a similar Sales and Distribution performance management position

• In June 02 joined the Air New Zealand Network Logistics team as Network Performance Manager responsible for the OR team, systems and standards and performance analysis and measurement

Events at NZ since we last attended AGIFORS 2000

• June 2000 - NZ purchased final 50% of Ansett Australia to take 100% control

• Oct/Nov 2000 - Combined AN/NZ announces a new business unit integrated structure

• Jan 2001 - Garry Toomey appointed as the new President and CEO of AN/NZ

• April 2001 - new “functional” structure announced to replace previously announced BU structure

September 2001

• Undoubtedly one of the most significant months in history in NZ

• Terrible events of 9/11 very much felt down under

• AN collapses the following day (put into voluntary administration)

• Major operational issues to be dealt with but well handled by a nucleus of key operational managers (about 10) and achieved thanks largely to the quality SABRE tools we had in place namely AIRCEWS and AIROPS

• NZ had to write-off a large the significant investment in AN. NZ was on brink of financial with approximately 90% debt to equity ratio

Later part of 2002 and 2003 - a significantly brighter period for NZ

• Launch of NZ Express on 1st November 2001

• Announcement of substantially improved 31 Dec02 half year profit and year-end forecast

• Re-negotiated tech crew (Dec02) and cabin crew (Mar03) contracts, both for 2 years

• NZ/QF commercial alliance announcement

An integrated product offering

Full Service Value Based Plus Value Based

Principles of NZ Express

GIVING THE CUSTOMER WHAT THEY WANT

• Lower fares, more choice

• More seats per flight

• Simplified booking and purchasing processes

• Improved loyalty benefits for high yield frequent flyers

Express Class a Success

20% savings in fares for customers

Internet bookings averaging 35% (pre-launch 4%)

PAX numbers up 30% on trunk routes

7% of customers using Kiosks - target is 50%

Auckland Koru lounge upgrade completed

Return to profitability

Six months to Dec 02 Dec 01* Change $m $m $m

Profit before unusuals & tax 138 (90) 228

Unusual Items (4) (330) (326)

Profit before tax 134 (420) 554

Taxation (41) 44 (85)

Net profit after tax 94 (375) 469

*continuing businesses only

Traffic up 7.3 percent

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

Jul Aug Sept Oct Nov Dec

RPK (millions)

2001

2002

Load Factors up 6.9 percent

60

6264

66

6870

7274

76

7880

82

Jul Aug Sept Oct Nov Dec

Per

cent

2001

2002

Optimisation tools assist in crew contract negotiation process• Both NZ tech crew and cabin crew contacts expired in the later part of

2002

• Pairings and roster optimisers were both used to model different contract rule scenarios highlighting cost impacts of changes to high degree of accuracy

• Introduced a new rostering system for pilots known as SBS (Seniority Biased System)

• Moved to paying pilots using roster average whilst balancing pilot hours within a narrow window and allowing a minimal number of outliers +/-

• Both pilot and cabin crew union negotiators directly engaged in reviewing OR models and data thereby gaining significant buy-in to the process

NZ/QF Alliance - Approval Progress

Kiwi Shareholder Approval

ACCC and NZ Commerce Commission

Shareholder Approval

In Progress

Latest events and Outlook

• War in IRAQ did not have a major impact on NZ

• The SARS is having a major impact•8% of international capacity has been removed through to September03

•Monitoring impact very closely

•No drastic cost reduction measures implemented yet!!!!!

• Forward bookings softening - but loads remain relatively high

• Full year profit forecast to 30 June 2003 still expected approximately PBUT $200 million, a $1.5billion turnaround from 2002

AGIFORS 2004

As proud hosts of AGIFORS 2004, Air New Zealand extends an invitation to you all

see you in NEW ZEALAND!!!!!!!

AGIFORS

March 2004