Ann: ADDRESS: AIR: Air NZ 2014 Annual Meeting Address

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					AIR
30/09/2014 14:20
ADDRESS

REL: 1420 HRS Air New Zealand Limited (NS)

ADDRESS: AIR: Air NZ 2014 Annual Meeting Address

ANNUAL SHAREHOLDERS MEETING
TUESDAY 30 SEPTEMBER 2014

TONY CARTER OPENING REMARKS
Welcome everyone to Air New Zealand's 2014 Annual Shareholders Meeting, here
in the Air Force Museum on historic Wigram airfield. This is my first Annual
Shareholders Meeting as Chairman, and it is fitting that we are holding it in
the city where I was born and spent most of my life.

This meeting is open to the public and is being webcast live for the benefit
of those unable to be here, and we have members of the media in attendance
also. Welcome all.

Before we start the meeting, I would like to introduce to you the Air New
Zealand Board of Directors.

From my far left:
- Rob Jager
- Jan Dawson
- Paul Bingham

And from my far right:
- Roger France
- Jonathan Mason
- Linda Jenkinson
- and our Chief Executive Officer Christopher Luxon

Seated in the front row and assisting us today are:
- Rob McDonald, the company's Chief Financial Officer
- John Blair, General Counsel and Company Secretary
- Gavin Macdonald from Bell Gully, the company's lawyers
- and Andrew Dick from Deloitte, the company's auditors

We also have several other members of the Executive team present today.
Moving to the formalities of the meeting, I note that there is a quorum
present and I declare the meeting open.

Notice of the meeting was duly given and the meeting has been properly
convened. We will turn to resolutions later in the meeting. Please note that
only shareholders, proxy holders or shareholder company representatives may
vote.

The order of events for this afternoon's meeting will be as follows:

- Following short addresses from Christopher Luxon and myself, I will take
questions regarding the Company's performance
- I will then move to the formal resolutions of the meeting
- Following this, I will open the floor to general discussion

CHAIRMAN'S ADDRESS
Air New Zealand achieved an outstanding result for the 2014 financial year,
with Normalised Earnings Before Taxation of $332 million, an increase of 30
percent. Statutory Earnings Before Taxation were $357 million, an increase of
40 percent, while Statutory Net Profit After Taxation was $262 million.

This represents the third consecutive year of earnings growth. Good progress
has been made on key strategic initiatives, with new aircraft enabling better
operating economics, an optimised network with the right alliance partners,
disciplined cost management and a daily focus on improving the customer
experience. We are well positioned to continue growing.

The airline is fundamentally in a very strong position, with gearing below
our target range at 42.9 percent and strong cash holdings of $1.23 billion.
Upcoming fleet purchases mean that capital expenditure will rise in the next
couple of years, but with strong operating cash flows and good access to
financial markets, together with a baa3 investment grade credit rating, our
position is expected to remain robust.

The Board declared a fully imputed final dividend of 5.5 cents per share,
bringing total ordinary dividends declared for the year to 10 cents per
share, an increase of 25 percent on last year.

Additionally, following a review of the company's capital structure and
consideration of the current and expected medium term liquidity and gearing,
the Board declared a special fully imputed dividend of 10 cents per share.

There have been some changes to your Board over the past year, and I will
touch briefly on these now. After stepping down as Chairman at last year's
Annual Shareholders Meeting, John Palmer remained as a Director until
retiring fully from the Board in March. I have already paid tribute to John,
but I again highlight the extraordinary leadership he showed during his more
than decade long tenure with this Board.

Dr Jim Fox also retired at the end of August, and I would like to acknowledge
his significant contribution since being appointed in 2006. Jim's successful
business career and strong commercial instincts enabled him to provide unique
perspectives during his time with the Board.

In March this year Jonathan Mason was appointed to the Board. Jonathan is a
valuable addition, having most recently served as Chief Financial Officer of
Fonterra Group, and has held a number of global leadership roles.

More recently, in June we welcomed Linda Jenkinson to the Board. Linda is a
world class Kiwi entrepreneur who has started several successful business,
and is now best known as Chair of Les Concierges, the San Francisco based
global travel company that she co-founded. Linda is currently based in
Sydney.

Both Jonathan and Linda will address you later in this meeting as part of
their election process, as well as Paul Bingham and Jan Dawson who are up for
re-election.

The coming year will see the airline significantly grow capacity as new
aircraft arrive. As we continue to deliver on our strategic priorities, and
based on our current expectations of market demand and fuel prices, we expect
to improve on the 2014 result in the coming year. This outlook excludes
equity earnings from the Virgin Australia shareholding. We have had an
encouraging start to the year with solid forward bookings into the high
season.

Thank you, and I will now hand over to Christopher Luxon.

CHIEF EXECUTIVE'S ADDRESS
Good afternoon everyone, and thank you for taking the time to join us here
today.

It's great to be back in Christchurch, where I'm originally from, and see the
resilience of the people and the progress this city is making in recovering
from the devastating earthquakes. Air New Zealand is a major employer in the
Canterbury region, and we are well aware of the ongoing challenges that
people are facing down here.

As a company we are committed to Christchurch, and I'd like to highlight this
with a couple of relevant examples.

In May this year we furthered our investment in the Christchurch Engine
Centre, a state of the art repair and overhaul facility that we operate as a
joint venture with Pratt & Whitney, employing more than 300 people. The
opening of the new 13,500 square metre work area enables our people to work
more efficiently in this facility, which specialises in the repair and
overhaul of V2500 engines that power our own Airbus A320s, and many other
aircraft around the world.

Additionally, we have announced our second season of offering direct flights
between Christchurch and Perth. It has been pleasing to see the strong uptake
of this service, connecting two important Australasian cities.

As Tony highlighted earlier, Air New Zealand's 2014 financial result was
again strong, and it is pleasing to stand before you today and say that we
have delivered what we said we would deliver. The result is testament to the
efforts of our team of Air New Zealanders at all levels of the organisation,
who are demonstrating their passion and commitment to ensuring that the
airline is performing better than ever before.

Under our Go Beyond plan, which was unveiled around two years ago, we
identified the four pillars to drive Air New Zealand's future success:
customers at the core, execute the plan, be fighting fit and have a winning
team.

Through all of this I want to be clear about our mind set - it's about AND,
not OR. We are generating stronger commercial results, AND enhancing our
customer experience, AND building a high performance, engaged culture in the
company. They're three interdependent goals - positively engaged people lead
to happy customers which creates a strong business.

The financial year finished on a very exciting note as we took delivery of
our first Boeing 787-9 Dreamliner aircraft, the first of its type in the
world. This aircraft is without question a game changer. It's a win-win
because we are able to offer our customers an improved inflight experience
while benefiting from 20 percent less fuel consumption than comparable
aircraft.

The effort required to bring a new innovative aircraft such as this into
service is significant, with the planning and preparation having started a
decade ago, and our people deserve tremendous credit for their hard work and
professionalism in bringing the aircraft online. We are very pleased with the
result, having recently launched the 787 on scheduled services on the
Auckland-Perth route.

We will now screen a brief video introducing you to this fantastic new
aircraft.

Our modern turboprop fleet allows us to viably operate into smaller regional
population centres, providing a crucial link for those communities and a
seamless experience for our customers who are connecting from larger hubs.

While there has been some conversation in the last few months about our
pricing in the regions, our improved performance has come from turning around
our international business which is now profitable. In fact, profit from our
regional network has declined over the last 5 years and our average regional
airfare is down 2 percent over the last 5 years.

I do believe that we simply have the best regional network in the world and
that New Zealand is very well served by its air services. We would be the
only airline in the world that flies a fleet that ranges from 19 seat to 332
seat aircraft. The reality is few airlines see the sense of servicing
regional towns like we do and consider it uneconomic.

Independent research suggests that New Zealand is well covered with all towns
of 20,000+ people with scheduled air services comparing to just over half of
similar regional centres in the likes of Australia, Canada and Sweden. The
same study showed that New Zealand boasts the cheapest like for like regional
fares with Australia ranking second - albeit 29 percent higher.

However, regional airline economics are very challenging and regional
turbo-prop airfares will sadly always be more expensive than jet airfares.
This is because the smaller the aircraft, the higher the cost per seat which
in turn drives our pricing. Imagine driving your car from Christchurch to
Invercargill - the costs per person are bound to be more expensive than say
if you took a bus where around 50 people share the overheads. It's economies
of scale.

So the key for us is to up-gauge and get markets into larger aircraft to
realise lower costs per seat to keep a downward pressure on prices. This is
why we've spent close to $200 million refurbishing our existing ATRs and
ordering nine new ones. Each region is different. Some markets have
sufficient demand that can support the larger aircraft, some struggle and we
have to adjust the schedule and frequency of services with the larger
aircraft, and then some are so challenged that even at high prices we cannot
cover our costs and we have to withdraw services like we have done in Wanaka
and Masterton in the last year.
As you can imagine, one of my priorities this year has been to proactively
engage with Mayors, Chambers of Commerce, Airport Management and local
business leaders to better understand the needs of regional New Zealand and
how Air New Zealand can help develop their regional economies. We are
committed to regional development whether it be through the creation of high
paying jobs in Nelson through our turbo-prop maintenance facility, launching
the Air New Zealand marathon series to drive 5,000 runners and their friends
and family to Queenstown during the seasonal off peak time, or championing
wine from regional New Zealand as the largest pourer of exclusively New
Zealand wines onboard and 27 years of the Air New Zealand Wine Awards.

Moving to the jet routes, our new Airbus A320 aircraft continue to replace
the older Boeing 737-300s. The A320s bring improvements to the customer
experience and offer improved operating economics.

We recently announced our new Domestic pricing structure, with four options
tailored to what customers value and offering increased flexibility. This was
developed following focused feedback sessions with customers, and the reviews
have been extremely positive.

Our Tasman routes continue to perform well. While the lower Australian dollar
has impacted revenue, we continue to see areas of growth and opportunity.
Together with our alliance partner Virgin Australia we offer a deep network
schedule and our Seats to Suit product ensures that we are well placed to
serve all segments of this important market - from the early morning business
traveller to leisure travellers flying during the day, we have a product that
is in demand.

Earlier this year we announced an order for new generation Airbus A320 and
A321 NEOs to replace our current Airbus aircraft on these routes commencing
in 2017. While the existing aircraft are still relatively young, we see real
benefits from the improved customer experience and operating economics that
come with these new generation aircraft.

Customers are increasingly benefiting from being able to seamlessly connect
from regional New Zealand to regional Australia and everywhere in between as
a result of the Virgin Australia alliance. Our shareholding in Virgin
Australia has now increased to 25.99 percent and in July I accepted a seat on
the Board.

While Virgin Australia's progress has been impacted by capacity increases
outstripping market demand in domestic Australia, they have made inroads in
gaining market share, particularly in the corporate market which is a key
plank of their Game Change strategy. I look forward to working with other
members of the Virgin Australia board to further enhance that business.

Our long haul international network continues to go from strength to
strength. After an extended period during which we have had limited growth
and poor profitability, our new aircraft deliveries are allowing us to grow
capacity in markets where we see strong demand. We are now beginning to see
material benefits of the simplification and modernisation of our fleet.

We have taken delivery of two additional leased Boeing 777-300ERs. These
aircraft are well suited to the missions we fly on our long haul network and
will be fully utilised alongside our new Boeing 787-9 aircraft to achieve our
growth aspirations in the coming years.
Our retiring B747-400 and B737-300 aircraft have truly been workhorses of the
fleet. Air New Zealand has operated variants of the 747 for 33 years, as well
as variants of the 737 family for 45 years.

You may have seen recent media coverage of the final scheduled 747 service.
Many people, including myself, feel sentimental about this iconic aircraft,
but we have to embrace progress and the newer technology aircraft which are
so critical to our commercial success as a business.

Earlier this year we announced an alliance with Singapore Airlines. The
alliance is a revenue share joint venture with Singapore Airlines where both
parties will co-operate to channel traffic between New Zealand and key
priority markets in South East Asia, Europe, India and South Africa through
Singapore. We now have the required regulatory approvals, and fares went on
sale last week, for flights commencing from the 6 January 2015.  We expect
this alliance to boost capacity between New Zealand and Singapore by 30
percent over time

This is a good win for Christchurch as Air New Zealand and Singapore Airlines
will work together to strengthen the service between Christchurch and
Singapore. The revenue share alliance means both carriers are incentivised to
sell all flights between New Zealand and Singapore without preference. We are
totally agnostic to whose plane you fly on as we simply divide the combined
revenue pool between us. This means the Christchurch-Singapore service will
be fully supported by the sales and marketing forces of both airlines.

Air New Zealand will be able to leverage its sales & distribution strength
with corporates and frequent flyers in New Zealand. Our comprehensive
domestic network creates opportunities to drive connectivity through
Christchurch for Lower North Island cities, for example, Wellington or
Palmerston North. The Alliance has the opportunity to jointly market and
promote the South Island into South East Asia and European locations.

Next year is the 75th anniversary of Air New Zealand and we intend to
celebrate the airline's proud history. From its beginnings as Tasman Empire
Airways Limited in 1940, the company has had its share of ups and downs but
it is hugely satisfying that as we reach this significant milestone, the
airline is in a stronger position than ever before.

We want to be a truly world class company from New Zealand taking it to the
world, and one that all New Zealanders can be proud of and engaged with.  Yet
we can't do it without your support - so we really do appreciate it.
Thank you.
End CA:00255889 For:AIR    Type:ADDRESS    Time:2014-09-30 14:20:06