Come in, God

By Frances Martin

Friday 1st March 2002

The new boss of Air New Zealand will have to combine the skills of a financial wizard, top diplomat, government liaison officer and human resources guru. No wonder it took a while to find this superhuman being.

There are a few Air New Zealand stories circulating the country. One of them involves a big supplier to the airline who's going around bragging about the great price he extracted from one hapless executive newcomer. It's not the sort of story that's going to break the company, but it illustrates an important point - over the past 18 months, Air New Zealand has haemorrhaged not only money, but senior management.

Of the 14 top executives running the company in 2000, only three remain in the current team. Some of the departures aren't surprising because they involved people working on Ansett, Air New Zealand's Australian subsidiary that collapsed last year. But others ran core businesses, and some resignations pre-date Ansett's collapse.

Insiders say the exodus began shortly after long-time chief executive Jim McCrea quit in July 2000 and the airline's then chairman, Sir Selwyn Cushing, temporarily took over as executive chair. Under Cushing there was a feeling the airline was in a holding pattern, despite the fact there was supposedly a merger going on with Ansett. Cushing was replaced by Gary Toomey in January 2001, but that didn't stop the outflow. The airline was certainly moving again, but some didn't like the direction. Not surprisingly, the resignations kept coming when Ansett went bust, leaving Air New Zealand with a $1.4 billion loss for 2001, leading to the government taking an 82% stake as part of a $1 billion Crown bail-out (see "Top echelon departures").

Senior management isn't the only disaffected bunch. In some departments, the whole middle management has been all but cleaned out. Following the decision to merge, some divisions within marketing and operations were shifted to Melbourne and staff were put on Ansett employment contracts. After Ansett went bust, Air New Zealand tried to get some of those skilled people back, but for the staff involved, going back to New Zealand means quitting their Ansett jobs and potentially losing valuable superannuation, long-service benefits and other entitlements. Only some have returned.

Air New Zealand acknowledges the loss of management talent, but spokesman David Beatson says the airline has found good replacements. "We are a leaner organisation than we've ever been [but] it's a pretty high calibre team," Beatson says.

Frustration with strategic decisions made by Cushing and McCrea is said to have contributed to many executives decamping, though personalities seem to have also played a part. Take Air New Zealand's board, including representatives from the airline's controlling shareholders BIL and Singapore Airlines - previously 30% and 25% of the airline. After announcing the cash injection last October, Finance Minister Michael Cullen described that board as "dysfunctional".

After Toomey's resignation last October, Air New Zealand was in the hands of executive director Roger France - its fourth boss in less than two years.

With so much experience now gone from Air New Zealand, building confidence in the management team looks set to be a key job for new chief Ralph Norris. And picking the right boss was a make or break decision for Air New Zealand. As insiders say, the airline's new board - it was overhauled after the bail-out - can't afford to appoint a chief executive who doesn't fully understand the New Zealand airline industry, or whose management style might provoke another round of resignations. As one told Unlimited: "They can't afford another Gary Toomey."

What other characteristics should this super-human chief executive have? Well, there's a bit of financial acumen needed. And nerves of steel, according to Australian aviation analyst Peter Harbison, since the airline industry's short-term outlook isn't good. Many airlines will see their gross revenues drop by a quarter this year, he says, and even the most aggressive belt-tighteners are unlikely to trim more than 10% from costs, leaving a substantial hole in their income.

Adding to Air New Zealand's particular woes is that even after the government bail-out, its balance sheet doesn't look that flash, and there's little cash sloshing around to soak up any future losses. Harbison believes the new chief executive probably has about a year before something gives. Either the airline will have to take drastic cost-cutting measures, or more bail-out money will be needed either from the government or a new shareholder.

Then there's the diplomatic bit. Managing key relationships - particularly with the government and Qantas - will be crucial. Norris will have his work cut out stopping politicians meddling in operational decisions, particularly those involving job losses, during an election year, Harbison says. And there's dealing with Qantas. The two airlines have important commercial ties and Qantas remains a likely eventual buyer for the government's Air New Zealand stake - although Qantas was recently reported in the Australian press as wanting to destroy its Kiwi rival.

It's no wonder the Air New Zealand board spent so long deciding who to appoint as the national carrier's new chief executive.

Top echelon departures

Gone are:

Ron Tannock, who ran the international business
Lesley Grant from in-flight operations
Graeme McDowall from government and international relations
Allister Paterson, who looked after commercial al-liances
Laurie Doolan, who took care of corporate governance issues
Grant Lilly from domestic operations, who now works for rival Qantas
Chief financial officer Adam Moroney (who replaced John Dell who did the job at the time of the 2000 annual report) has resigned, and will be temporarily replaced by former Fletcher Challenge executive Shane Warbrick
Four others from the 2000 executive are no longer on the team: Trevor Jenson (group general manager, operations, technical), Ian Diamond (group general manager, operations, services), Peter Elmsly (general manager, cargo), John Gribble (general manager, group portfolio business) and three others involved in the Australian operations (Ron Rosalky, Garry Kingshott, Mike Flanagan)

Still on board are:

Andrew Miller (vice-president of strategy and planning), who was former general manager of the domestic airline group in New Zealand and has now been elevated to the top tier
Norm Thompson (vice-president of sales and marketing), who was previously regional general manager in North America and Australia and for a period ran sales and marketing for the combined Ansett/Air New Zealand group
Brendan Fitzgerald, vice-president of customer services, who previously ran the worldwide terminal system for the combined group
Bill Jacobson, vice-president of operations and technical who was, Beatson says, "one of the high-flying recruits" brought in during the merger
Carolyn Tremain, senior vice-president of human resources and organisational change
David Beatson, vice-president of public affairs

Frances Martin
frances.martin@paradise.net.nz

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