News Backgrounder
Air New Zealand leaves competitors in slip stream
June 1st 2017
Mainland Chinese carriers may be rapidly increasing their capacity into Australia and New Zealand, but Air New Zealand (Air NZ) CEO, Christopher Luxon, and his Air New Zealanders are thriving on the competition. Read More »
“It’s been an absolutely fabulous year for us. Ten new competitors showed up in our space in the last 12 months, including some of the biggest airlines in the world, but we’ve competed incredibly strongly and incredibly well,” the Air NZ boss told Orient Aviation on the side lines of the Star Alliance 20th Anniversary gala in Frankfurt last month.
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| 'We’ve taken some yield pressure, as everyone across the industry has, but having said that we’re rather unique. Our unit costs are down 3.5%, excluding fuel. We have worked really hard running this as a business, not just an airline' |
| Christopher Luxon Air New Zealand CEO |
“We’ve taken some yield pressure, as everyone across the industry has, but having said that we’re rather unique. Our unit costs are down 3.5%, excluding fuel. We have worked really hard running this as a business, not just an airline.”
Air NZ will announce its fiscal year results in August and Luxon said the carrier is “on track for a very good result indeed”.
The capacity assault has “certainly been decreasing in the last few months. American [Airlines] has announced it is out of the market for two months. People are being rational with capacity management”, he said.
“We also have some Chinese carriers removing capacity for the winter months. They did not do it in 2016, but this year they are cancelling some flights. There is a lot of rationalisation in the market,” Luxon observed.
“People get confronted with economics. You have to start being smart at some point,” the ex-Unilever top executive said.
“The carriers coming from secondary or tertiary cities in China are not too much of a worry for us. When I look at the performances of those airlines that have been in Australia and New Zealand for a year or two, their load factors are abysmal.
“They are really struggling economically to make those routes work. We’re going after a very different sector of the market. We are not interested in a lot of customers that other airlines take because we know they’re low-yield and low value.”
Air NZ continues to defy the industry’s declining performance. “Upfront is doing really well. We have four more B787-9s coming in this year. They will be in a configuration that will be a lot more Business Premier, a lot more premium economy and less economy,” he said.
Luxon said both Houston and Buenos Aires are outperforming forecasts. “Buenos Aires has exceeded our expectations. We have just announced a frequency increase from three to five weekly B787-9s. The key factor is that 40% of the traffic is Australians coming through Auckland and onto Buenos. The same goes for Houston,” Luxon said.
Air NZ just won a new round of customer service and preferred employer awards. “Sixty per cent of New Zealanders said they wanted to work for us. We had 45,000 people apply for 3,000 jobs in the last year, but we’ve only had 6%-7% in staff turnover so we know we have good morale,” he said.
Are the golden years of global airline alliances over? “Star Alliance has been a pretty great story for us. It’s been a great way to get our global connectivity and network together. Obviously, in more recent years, we’ve done more bilateral deals and other joint ventures, but that does not mean we are not fully committed to Star,” he said.
“The focus [at Star] has shifted in the last six to nine months to asking how do we keep perfecting the customer experience and how do we make it a much more seamless and joined up experience. There’s lot of irritation and pain points that need to be solved for customers along the way, so we are saying lets renew our energy and do exactly that.”
Areas for improvement, Luxon said, were joint opportunities in bag tracking, a more seamless check-in process and retroactive mileage claims.
“The way we are going to achieve this is by digital enablement and greater digitalization. It is the big focus as we go forward. It will be an exciting period as we try to make the member airlines work together in a more seamless way for our customers,” he said.
