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How Air New Zealand become Australia's most profitable Airline

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burmans

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re: How Air New Zealand become Australia's most profitable Airline

"Norris says a decision 10 years ago to buy 777s and 787-9s was a crucial milestone for the future of Air NZ’s long-haul fleet."
Reading the article suggests it was a bit more than just one factor. Actually getting negotiations with the union to a point people took a 20% pay-cut, innovation, showing some vision, branding all impact.
 

TomVexille

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re: How Air New Zealand become Australia's most profitable Airline

Interesting little article. No doubt there will be people bleating about how the NZ government bailed them out, but the fact is they now make a profit (and help prop up VA :shock:), and you usually have to be successful to do that.
 

whatmeworry

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How Air New Zealand returned to profitability.

The return to profitability helped give the management team and the board, led by then chairman John Palmer, the confidence to place a large order for new long-haul aircraft. That included the 787-9, the stretch version of the Dreamliner, which made its delivery flight to Auckland on Friday. Air NZ was the first airline in the world to take delivery of the new plane.

The Kiwi carrier is now the most pro*fitable airline in Australia. It expects to report a full-year pre-tax profit of at least $NZ300 million ($282 million) in August, which compares with analysts’ forecasts for a pre-tax loss of $731 million at its once-stronger rival Qantas.
Within the airline industry, Air NZ has plenty of admirers.
Dominic Walsh, the managing director of brand consulting firm Landor Australia, has worked for Qantas and Jetstar. He says Air NZ’s focus on innovation is much more exciting for customers and employees than Qantas’s cost cutting.
 

BD1959

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re: How Air New Zealand become Australia's most profitable Airline

Reading the article suggests it was a bit more than just one factor. Actually getting negotiations with the union to a point people took a 20% pay-cut, innovation, showing some vision, branding all impact.
Yep, it's called "a teaser"!

Regards,

BD
 

harvyk

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Whilst you certainly have to take you hat off to them, quite a few of their innovations was completely and utterly cost cutting measures. For example removing F and making Dom / short haul int LCC like experiences often without J, removing check in agents and replacing with machines and simplifying the fleet.

They are also in the unique position where whilst their geography works against them (eg they will never be a hub for more than Australia), their relatively small population size means that there will probably never be another real threat domestically (JQ doesn't really count), plus the desirability of their country publicized in some big international movies (eg LOTR / The Hobbit) has given them a helping hand like no other which they have capitalized on beautifully (who hasn't seen the LOTR safety video? Even if you haven't flown with them, that was as much a 3 minute ad for Air New Zealand as it was pointing out the exits).

To state that the B789 was part of their success so far is also a bit of a stretch, since I don't believe it's done a single revenue flight, and certainly hasn't done enough to prove the types worth long term.

Having a gov't willing to bail the airline out if the grand plan does not happen as planned helps too...
 

docjames

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I think they took some hard decisions that weren't popular with fliers but enabled them to return to profitability.

Effectively dumping J on short haul was one (the most notable) of them. But they also put in place excellent cost controls and made the brand inviting (despite the "downgrade" in product) whilst at them same time undertaking a competitive long haul product. They also took unpopular but effective decisions re: pacific island flights and relative subsidies / profitability (ie. if they couldnt fly them for a sufficient profit, they either campaigned politically for increased subsidy or cut routes). Again, unpopular but effective.


They also were far more effective at getting staff on board with "the vision" or "the turn-around" than others (cough...QF...cough).


Hats off to them, the question for them now is to sustain it over the next decade.....
 

moa999

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Whilst I have no doubt that management have been inventive, and have managed to get the workforce far more engaged and taking cuts that I suspect wouldn't be possible in Australia,
the government bailout sure did help.

As I suspect did QFs decision to replace its domestic service with Jetstar which gave NZ a massive legup in the corporate market (albeit it already had a strong position there) and the cancellation of the direct AKL-LAX services

They also haven't yet felt the full impact of the Asian LCCs (think AirAsiaX only had a short dalliance)
 

zainman

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The fact that their Frequent flyer program is one of the worst around must also help their bottom line...
 

harvyk

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Whilst I have no doubt that management have been inventive, and have managed to get the workforce far more engaged and taking cuts that I suspect wouldn't be possible in Australia,
the government bailout sure did help.
You can say that again, we can be very resistant to change, and without been pro or anti union, (they've done good things, they've done bad things), I suspect that any change would be fought by the unions despite what it will do for the company long term.

As I suspect did QFs decision to replace its domestic service with Jetstar which gave NZ a massive legup in the corporate market (albeit it already had a strong position there) and the cancellation of the direct AKL-LAX services

They also haven't yet felt the full impact of the Asian LCCs (think AirAsiaX only had a short dalliance)


Which airlines fly direct AKL-LAX services now? I'm talking direct service, not something like an FJ stopping in NAN. Also since one of their services to LHR goes via LAX, they also have the flown on of a direct LAX-LHR flight. Hardly a route to be sneezed at.

I don't think they will ever have true competition from Asian LCC's. NZ is a long way away from Asia and has a very small population. Even AKL is only on par with some of our medium sized cities, (population wise it's similar in size to ADL), and has no logical connections from Asia, which means that AKL / NZ would be the destination. That's not to say that LCC's don't fly to NZ from Asia, it's just I don't think they will ever see AKL as a primary market.
 

Cool Cat Phil

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Just to add my 2 cents worth.... Air NZ has gone down the road of Aer Lingus (Irish Carrier) & offered a quasi LCC product offering for short haul & a Full service product offering for long haul. It's ironic that Aer Lingus has struggled with this two tiered approach yet Air New Zealand has been successful.

Although I do agree with many contributors so far that Air New Zealand had been on the receiving end of a few hand-outs in the past & no doubt this has been instrumental in keeping their noise above water.

Air New Zealand Certainly have a terrible Frequent Flyer Program with little to no incentive for an Australian based Customer to join. I'm lead to believe Its ranked the worst amongst the star alliance group of airlines.

But Air New Zealand certainly have been creative as of late, particularly in the marketing Department with bold Advertising, highly competitive product offering is winning over the price sensitive customers & of course their famous quirky pre-departure emergency procedure Videos. No doubt small but innovative steps like this helps to win over new customers.

Here's hoping the competition here in Australia take note & jazz things up a little.
 
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anat0l

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The fact that their Frequent flyer program is one of the worst around must also help their bottom line...
It's funny that people in the USA see DL in much the same fashion, viz. likely the best USA carrier in terms of service and onboard experience, but the worst value FFP.

NZ Airpoints isn't bad if you are a NZ*E where you can virtually always guarantee yourself an upgrade using Standby Airpoints Upgrades.

When I was a NZ elite, I wish NZ flew to SIN (and still do now). There were some who pined the loss of HKG-LHR being handed to a codeshare with CX, but it was quickly a case of the world's smallest violin...

Everyone in NZ who wants to fly long haul internationally is happy to fly to AKL first. Luckily AKL is a highly respected airport, unlike SYD. The same is not easily said for Australia, but flying is predisposed to be SYD or MEL centric anyway.

To put perspective on the situation, it took a long time before many people were optimistic about NZ, and the FF jury still argue whether it is good times, save for a highly profitable carrier. If people rewrote history knowing what they had now, they would have erased all the ennui and pessimism experienced and expressed in many previous years after the AN collapse, and simply replaced it with, "all good, bro!"

There are many things unique to NZ beyond their measures which has now ensured the profitability of the airline. I'd say that as long as they don't purchase another Ansett, they'll be set for many generations to come.
 

under the radar

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gotta love it how some overseas based airlines 'get away' with changing/'tweaking' their 'business model'/'reinvent' itself and also manage to p**s of their FFers, yet that airline is still 'applauded'/respected for making those tough decisions.....but alas, when particular OZ airlines try to 'reinvent'/'change with the times', do what it needs to survive...they are 'chastised/lose respect of their travelers/FFers...I reckon that reveals more about the spoilt 'pu**y' travelers from OZ :D
 

harvyk

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Everyone in NZ who wants to fly long haul internationally is happy to fly to AKL first. Luckily AKL is a highly respected airport, unlike SYD. The same is not easily said for Australia, but flying is predisposed to be SYD or MEL centric anyway.
One of the things which works for AirNZ, the majority of the country is in one major population center at the top of the country, as close to all possible long haul destinations as possible. As far as AirNZ is concerned, there is no need to other anything other than direct AU services from WLG / CHC. In a way that is no different than QF / VA offering MEL / SYD services to PER. Whilst geography works against the country in terms of physically getting there, the placement of the cities once you do is certainly a big plus.
 

casanovawa

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gotta love it how some overseas based airlines 'get away' with changing/'tweaking' their 'business model'/'reinvent' itself and also manage to p**s of their FFers, yet that airline is still 'applauded'/respected for making those tough decisions.....but alas, when particular OZ airlines try to 'reinvent'/'change with the times', do what it needs to survive...they are 'chastised/lose respect of their travelers/FFers...I reckon that reveals more about the spoilt 'pu**y' travelers from OZ :D
Actually many different business try the same changes and some do it well and some do it poorly (or extremely poorly)...

There are only so many business and change management strategies out there after all...

The management teams/individuals that do it well get recognised and rewarded, the ones that do it poorly get the @rse (well usually but obviously not in all cases cough *** QF *** cough!)
 
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anat0l

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One thing I forgot to mention is that except for with NZ Airpoints, it is almost impossible to get a NZ Business Premier seat as an award, except to some select destinations, e.g. Shanghai, Osaka or Tokyo (when they are not operated by 767s without Bus Prem). I think you have a better chance getting a tea date with the Queen, actually.

I'm not sure if Velocity members have an easier time accessing NZ Business Premier inventory compared to Star Alliance partners.

Just a minor point; I doubt this greatly improves their profitability but it is something of quaint note.
 

ric_melb

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I wish to be pedantic in regard to the reporter's headline. Surely Air New Zealand is Australasia's most profitable airline. It is not an Australian airline!!

Read the article this morning. See SMH has now changed it to Australasia!
 

samh004

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I think the only reason QF is set to report such a monumental loss is the way they do their accounting... there's definitely some funny books going on, but I'm not sure what the end game is. If you remove QFi, they do pretty good.
 

AdMEL

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I wish to be pedantic in regard to the reporter's headline. Surely Air New Zealand is Australasia's most profitable airline. It is not an Australian airline!!

Read the article this morning. See SMH has now changed it to Australasia!
Agreed!

I think the only reason QF is set to report such a monumental loss is the way they do their accounting... there's definitely some funny books going on, but I'm not sure what the end game is. If you remove QFi, they do pretty good.
Also agreed! There's a big difference between profit (or loss) and cash flow. It's quite possible to make a loss (or losses) and still generate positive cash flow. If I was to play devil's advocate, I'd say that the huge loss is all to do with making things looks worse than they are, to push the agenda of QF (or AJ), so as to force change to legislation (QF sale act and foreign ownership) and provide further excuses/reasons to: move more services to JQ, potentially shut QFi, break unions. A similar thing happened with the car industry in Australia - huge losses from accounting write-offs to provide an excuse to shut it down, despite positive cash flow.

Having flown NZ recently, I was not impressed! Extremely cramped seat pitch! Worse than JQ and TT!
 
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