Strategic Analysis of Air New Zealand

Abstract

Air New Zealand is a leading airline based in New Zealand; The Auckland-based airline majors its operations in 21 domestic and 31 international destinations.  The airline operates in almost 20 countries around the Pacific and some parts of the United Kingdom.  The airline has enjoyed much success and dominance in the New Zealand, although not as a monopoly. The success of the airline can be attributed to any factors. This essay targets to explain the strategic analysis of Air New Zealand in details. The essay contains information got from various sources and the info involved been cited accordingly.

Introduction

The national airline of New Zealand was established in the year 1965, following the buying of Tasman Empire by the government of New Zealand.  Airways Limited, which was then the provider of Tran-Tasman flights series named the airline Air New Zealand.  For the time that the airline has existed, it has undergone through many levels of change. For a long time, the airline was owned by the government fully. However, later stakeholders and investors came in, and today the airline is owned jointly. The airline has a unique strategy which ensures that it remains on top of the game in new Zeeland airline activities. The 2016 ratings rated air new Zealand the airline of the year in the country. This means that the airline was almost acting as a monopoly in 2016. Skytrax world airline awards rated Air New Zealand the world’s best in terms of premium economy class.  These are just but a few of the prizes that Air New Zealand attained in 2016. There are more and more prizes.  One thing that stands out with the airline, however, is the fact that most prizes were commendable and the airline beat other much world-class. Currently, Air New Zealand operates in 29 known countries (Díaz et al. 2016). This involves major connections between cities in Europe, Asia, Oceania and North America. The airline also operates domestically in New Zealand.  These operations act to open up both the interior parts of New Zealand to the world and vice versa. The journey of the success of the airline has not been a simple one. This is because commercial airlines today operate in a very competitive environment characterized by high expenditures and costs governed by international and national regulations. These laws are hard for the airlines but either way, they have to adapt and operate according to the rules. The airline has had its highs and lows. Before 1982, the airline was in great debt and was in the consecutive loss. Norman Grey was the CEO who was appointed then to turn around the state-owned Air New Zealand in the right direction.  The airline was experiencing high wages, limited geographical market, low revenues and high operating costs (Lyon & Francis, 2016). Grey organized wage negotiations with the union of the airline's employees, and wages were altered to ease the burden.  To increase sales and returns, the airline purchased a fleet of Boeing 747s. The airline was, therefore, able to accommodate more passengers and provide the required comfort which characterizes an international airline (Lyon & Francis, 2016). Grey also introduced some new carriers which were quickly sold out.  By 1988 when Jimmy left, the airline was back on its feet. Jim Scott replaced him with a new marketing strategy which mainly targeted the Pacific tourists. The period from 1982 to ’88 is attributed to most of the success story that characterizes air new Zealand today. Although more policies were introduced later, Grey’s policies are still evident a great deal and to date, they make Air New Zealand what it is. Like any other airline, Air New Zealand has its vision, mission and goals and ambitions (Fu & Oum, 2014).  The airline targets to strive and become the leading airline operator in every market they venture.  The airline intends to achieve this by creating a workforce which is very well motivated and is omitted to its customers, in the typical New Zealand way, to attain superiority in the industry’s returns. Judging from the recent dealings and results of the company, this vision can be defined as completely valid and achievable. The airline has taken many steps towards achieving its targets. Come 2000 December, when Gary Toomey took over as CEO, the company was almost on its knees, a repetition o the occurrences of the ‘80s (Merkert, & Pearson, 2015).  The main reason behind this was cost expenses (Merkert, & Pearson, 2015). The expenses were more than the company could manage.  By September, the airline was in a state of voluntary administration and was almost forced to cease its operations.  That year, the company recorded $1.4 billion dollars in losses.  The government by this time had sold its shares, but at this point, it had to step in. The government bought 76.5% stake in Air New Zealand to save it from collapsing. Ralph Norris, a new CEO was appointed, and it is at this point that the current vision was created.  The priority of Norris was to stay in business. He believed that Air New Zealand was meant to fly people, not planes.  Therefore, his approach towards customers was to initiate a personal interaction between the management and the customers. He focused on what customers needed, not what the stakeholders demanded. In doing so, he realized that the employees were crucial in bringing the company back to its feet. Therefore, besides coming up with tough regulations for employees, he also targeted at motivating the employees. Unlike Grey in the 80’s, Norris did not negotiate to reduce prices with the employees union. He cut off 40% of the managerial positions which were burdening the wages (Safiullin et al. 2014). In so doing, he ensured that the junior employees, who in most cases interact with the customers, were not negatively affected (Safiullin, et al. 2014).  Online bookings were also introduced, hence reducing dependency on travel agents. To focus more on international activities, serving meals for local travelers was cut. By 2005, when Norris handed over to Robert Fyfe, the company was swimming in profits. Fyfe is another character who had unique managerial skills and upheld the situation of the company the way it was expected of him (Walulik, 2016). He believed in exploring new ideas (Walulik, 2016). Communication was his prime objective. He wrote a weekly email to his staff to brief them. He also attended to all calls that were addressed to him personally, in that communicating with him was very easy. Fyfe was present in all activities of the airline. He continuously joined his staff in different sections regularly. One night, he joined a team of engineers on the night shift to fix a wheel, being an engineer by profession himself.  He was awarded many prizes, especially in the field of communication and teamwork (Gillen & Hazledine, 2015). In 2012, Fyfe left to pursue other personal interests (Douglas et al. 2017). His successor, Christopher Luxon, is still the CEO of the airline today. He is a strategist who is down to earth and pays attention to detail. His prime focus is to increase sales. His strategy has been impressive and has been bearing fruits since his inauguration. The new CEO has built relationships with the tourism industry, including travel agents, airports and other bodies involved. Luxon has a history of around 18 years in the airline and therefore knows everything regarding the carrier operations. When he was running the international wing of the airline, he is accredited to cutting off operations in unprofitable routes which were costing the airline more than $2 million in one week. Air New Zealand's management under Luxon has also crafted strategies to attend to potential threats regarding the change in market patterns and other calamities such as terrorism (Davies, 2016).  These, however, cannot be guaranteed without the input of all the employees of the airline. The managers, the employees, the pilots, the crew in the cabin, the luggage movers and the engineers all have to do their parts and do them with dedication. Even the most convenient strategy in the world needs the contribution of any stakeholder (Davies, 2016). In summary, the operations of the new Zealand-based airline have faced significant challenges in the last half of the century. Through changing strategy and adopting new methods, the airline has always come back to its feet. Situations, where the airline was almost literally on its knees, have been witnessed and overcame. The current strategy of the airline still stands out as its best of all time. The airline threatens to enjoy the monopoly in the near future if it already has not begun.

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