The role of airports is greatly underestimated, as the airline industry goes forward after a pandemic that caused devasting effects.…
Exclusive: An Interview with Air New Zealand’s CRO
The effects of the coronavirus crisis on air transport demand are well known by now. A sheer drop in demand, combined with a very high number of booking cancellations has brought airline traffic to an all-time low. As a result, countries quickly reacted to ensure the survival of such companies for a post-crisis economic recovery.
Meanwhile, some airline executives have been outspoken on social media about the practical effects of the COVID-19 crisis in the industry. This is the case of Air New Zealand’s Chief Revenue Officer, Cam Wallace.
Wallace called the attention for bringing, through his Twitter account, daily updates and practical examples of the toll the coronavirus is charging on New Zealand’s main airline.
Forward revenue performance for @FlyAirNZ continues at around 1% of demand. We got one A320 worth of sales yesterday for May travel. June was better at 1.5% albeit that LY was weak! Very keen to see whether the clarification of level restrictions today has an impact. @andykirton
— Cam Wallace (@CamWallace_NZ) April 15, 2020
One of his most retweeted updates showed an impressive, albeit quite frequent these days, performance in one of Air New Zealand’s flights; 83 bookings but zero passengers showing up.
This morning’s @FlyAirNZ flight to Raro highlights the challenges with forecasting in a Covid world – 83 passengers booked, flight departed with a load of zero. We do have a ‘solid looking’ return sector and some cargo in the hold. @andykirton pic.twitter.com/KEdUwtIFqd
— Cam Wallace (@CamWallace_NZ) April 10, 2020
The executive sees this kind of information sharing as something of public interest, since New Zealanders “deserve a clear understanding, in real-time, of what is happening to their national airline”.
AirlineGeeks had the chance to catch up with Wallace to discuss the effects of this crisis. Wallace highlighted the need of this kind of information through social media in these difficult times and his forecasts on a future recovery of demand.
AirlineGeeks (AG): How has your routine been affected by the pandemic? As a senior manager at an airline, do you still need to work at the airline HQ?
Cam Wallace, Air New Zealand’s CRO (CW): It’s been a drastic change! Previously my schedule was one week in New Zealand, then the next offshore so this is my longest stint in one location for a decade! Aviation is defined as an essential service in New Zealand, [so] I go into the office about 2/3 times a week to do live-streams to staff all around the world as communication is critical right now. The balance of work is from home making calls and connecting via audio-conferencing.
AG: When did you realize the demand hit the cliff and which measures, as the airline’s CRO, did you take at the first moment?
CW: We were closely monitoring the demand signals once the virus started to emerge in Wuhan. We suspended services to Shanghai about 9 weeks ago and at that stage we were also concerned about the demand outlook for Hong Kong. After that, things turned pretty negative very quickly and then governments started to impose strict travel sanctions which really saw demand collapse. We have been cutting routes and capacity pretty constantly over the past two months, [and] we currently have a very basic schedule primarily for essential workers and cargo.
AG: As a Chief Revenue Officer, it must be difficult to serve at this role in a time without any passenger revenue at all. At this moment, with demand nearing zero, what can you actively do to ensure the financial health of the airline?
CW: Our first priority has been to care for our people. The harsh reality evident to all is that $0.5 billion airline, in the short-term, can’t employ the same number of people as a $6 billion airline. To preserve our national carrier our key focus is to right size the cost base of the business so that it reflects our new reality. This is an extremely painful process as it personally affects many dedicated staff. People in the travel industry are a unique and dedicated bunch. I have both cargo and loyalty in my portfolio so these are components of the business that are still progressing well, but watching other hard-fought revenue positions collapse has been somewhat challenging! One silver lining has been the collaboration with our international airline partners during the passage of this crisis I have been in regular contact with our alliance partners and other airline executives. We share our collective perspectives, painful stories and plans for the future.
AG: Your outspoken attitude on Twitter about the situation during this crisis has been calling attention. Why have you decided to share these data to the public whilst many other executives have a very different approach on social media?
CW: New Zealanders have a deep connection and loyalty to Air NZ. They deserve a clear understanding, in real-time, of what is happening to their national airline. These people that are invested and interested in Air NZ through this crisis are the same people who will be with us as we return to better times.
AG: Why do you believe it is important to share this information to the public?
CW: Air NZ is 52 percent owned by the government, therefore our loyal customers are also indirectly shareholders. We are living through a unique crisis and I think its good that our customers understand the gritty reality we are facing and therefore the decisions we are making and the rationale which supports the calls.
AG: From the perspective of an airline manager, do you believe other executives of the industry should follow this trend of information sharing and why? In which sense the public awareness would be beneficial for the sector?
CW: I really think it’s a personal decision. I have always tried to be direct and honest with our staff and our customers.
AG: How will this contact between head managers of companies and the broader public affect the services and the companies’ decisions after the pandemic is gone?
CW: Some of the information we are sharing is currently less sensitive because we aren’t in a normal operating environment. I expect overtime the trend towards transparency will continue with most companies.
AG: Cargo is becoming an essential source of revenue for airlines in this crisis. After the virus is gone, do you expect it to receive more attention from passenger carriers – including Air NZ? Why?
CW: The challenges with passenger demand and our short term reliance on cargo has put a keen focus on the revenue and profit pool from cargo. I do think we will have a bigger focus on that segment and the opportunities that exist in that division.
AG: How and when do you expect recovery to take place from a revenue perspective?
CW: We expect our domestic market to emerge first, then short-haul markets and last of all long-haul – potentially on a country by country basis. The timeline is very uncertain and will be driven by the management of the virus and our governments rather than the airline. Our first priority is to support New Zealand’s efforts to manage the spread of COVID-19.
AG: Some executives have mentioned the post-crisis industry will see a very different scenario when it comes to the relation between passenger and airline. Do you agree with it? Why?
CW: After 9/11 and the GFC [Global Financial Crisis] we saw significant changes to airfare products and passenger journeys. I expect a similar level of disruption for airlines, passengers and the wider travel industry. This event is so massive it will drive material changes right across the industry.
AG: Do you believe pricing will be a decisive factor on passenger confidence during the recovery? When passengers start flying again, do you expect to see any sort of dumping from Air NZ or other carriers to regain trust from passengers?
CW: When we emerge from this medical crisis we will then have to face the economic hangover. It’s likely that we will have more governments involved in more airlines, excess [of] capacity in most markets and a smaller market size due to a reduction in discretionary spending. Price will always play a key role in stimulating some segments of the market, that’s one thing COVID-19 won’t change.
AG: How is long-term demand behaving? When things start going back to normal, do you expect to see short-term bookings snapping back first, or do you expect long-term bookings to return first?
CW: Our expectation is short term business travel will bounce back first, we will see some pent up demand in that sector. VFR [Visiting Friends and Relatives] is also likely to emerge quite quickly as people seek out friends and family to try and re-connect.
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