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Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 6:13 pm


Alliance or bust says Air NZ boss
13 April 2003

Air New Zealand will pursue an alliance with Qantas or it will not survive the "new order of aviation", Air New Zealand managing director, Ralph Norris, said yesterday.

Norris made a blunt statement after a scathing initial response from the Commerce Commission over the airlines' plans to form an alliance.

Norris dismissed the commission's optimism about Air New Zealand's financial position as "aggressively over confident".

"To infer that there may be other alliance partners waiting in the wings or that the government or other benefactors will put additional capital into Air New Zealand on request is unrealistic," he said.

"Regrettably, fairy godmothers do not exist in business. There are, however, many predators who would like to control Air New Zealand, or see it weakened."

Norris said traditional airlines were suffering as budget providers offered cheap deals on popular routes.

"The expectations of passengers have changed and budget airlines are providing point to point travel on cherry picked routes and in doing so undermine traditional airlines which provide comprehensive, geographical networks."

He attacked Virgin Blue's insistence that Air New Zealand sell its budget arm Freedom Air before an alliance was approved.

Norris said Virgin Blue was "cynically posturing" and "demanding competition watchdogs give it a free monopoly on the budget airline business across the Tasman and domestically in New Zealand".

He said without the alliance, Qantas would "move aggressively to protect its position" in New Zealand and in trans-Tasman markets.

"Without the alliance, Qantas simply cannot afford to live in its status quo position in local markets and Air New Zealand cannot afford to respond. The "war of attrition" is not an economic theory - it is commercial reality."

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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 6:31 pm

This is just a political statement - Norris for some reason wants his stupid alliance to go through, and he can only get it through public support. And he can only get public support if people think "Air NZ is going to bust".
Why doesnt he just persue an alliance with another airline, say SQ? He'd get the same sort of support, but with the authorities approval.
Apart from that, if Air New Zealand would just concentrate on bringing people to and from NZ from the main Star hubs (SYD,SIN,LAX,HKG,NRT), I am sure they are going to do well. They are operating at lower costs than most airlines so I really dont see how this is not going to work.
Why does Air NZ always pick crazy CEOs? Norris has just got this fixed idea in his head, that he needs to get over!

Yours truly - StarFlyer
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 6:44 pm

Is it just me, but I don't think SQ is that keen to jump back in bed with NZ after what NZ managed to pull off. SQ is probably concerned with a few problems of its own at the moment, and after seeing its multi million dollar investment in NZ turned to peanuts, I don't think they'd be filling NZ's begging bowl straight away. It was hard enough to do so when they wanted to!

Jim McCrea wasn't that crazy, Toomey had a lot of bad luck, I don't think NZ has had lots of crazy CEOs.

A crazy chairman? Yes, sorry I mean, Absolutely!


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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 7:22 pm

I am wondering whether part of their problem might be when they have to start replacing some of their widebody aircraft. The A320s probably aren't that bigger problem but going out and leasing some widebodies is money they don't really have.

I always wonder why some companies insist that they always get big. What is wrong with just providing a service.
Why fly non stop when you can connect
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 7:23 pm

StarFlyer, as a staff member of the company saved from oblivion by the man you call 'crazy', I would suggest you check your facts before mouthing off.

QF and NZ are suited to an alliance - more so than any other airline. There are no suitors waiting in the wings - least of all SQ. The cold hard truth is that Air NZ needs to become part of a larger whole if it is to do any more than continue to struggle to survive, while being left in the dust by other airlines - for an example of the widening gap, compare with . Fantastic inflight service and genuinely caring staff can only compensate for so much.

Ralph Norris is one of the most successful CEOs in New Zealand - I respectfully submit that he knows the situation far better than outside onlookers.
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 7:36 pm

OK, TG992, I agree with you, Norris has done well in most aspects. When I said crazy, I meant the NZ/QF alliance, simply because right from the beginning it was obvious that it wouldnt go through as proposed.
And as a good CEO, Norris should have seen that, I doubt he lacks that much objectivity. Everybody knew it wouldnt happen the way QF/NZ proposed it, so why is he making statements like this now?
As Air NZ fly lots of long routes, I would say they are by far not as vunerable as other airlines to low cost carries, simply because locos cant compete on 12h flights. Thats where you still need proper service. So what are they scared about?
As said above, if they focus on getting people from UK/Europe to transfer onto NZ at those ports, they should be able to make money. Add a few services to other Asian cities and the London flight - I dont see how they can loose money there.
I am truly sorry if I offended you, TG992, I shouldnt have used such a harsh word.
Yours truly - StarFlyer
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 11:01 pm

There are 2 reasons an "alliance" (read merger) between Qantas and ANZ is good for ANZ.
1) cheaper deals on fuel, maintenance and aircraft (because of larger volume)
2) higher ticket prices because the resulting alliance/airline will control the entire continent and there won't be any competition left.
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 13, 2003 11:06 pm

Jwenting, good points! I like number 2), hits the nail on the head!

I should have imagined that Air NZ should have gotten cheaper deals on fuel,maintenance and aircraft through Star Alliance.

Or have alliance not progessed up to the stage of joint aircraft ordering and fuel hedging?
Yours truly - StarFlyer
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RE: Alliance Or Bust Says Air NZ Boss

Mon Apr 14, 2003 12:03 am

any comments from anyone about the idea that ralph norris is not actually interested in an alliance with qf/nz and is actually keeping qf from trying to squeeze nz while nz is down. may be this is stalling tactic while nz restructures and gets back on its feet. i found it an interesting thought as geoff dixon has threatened to dump capacity and put nz out of business.
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RE: Alliance Or Bust Says Air NZ Boss

Mon Apr 14, 2003 8:19 pm

interesting, the chief executive of Air NZ (or whoever was on Business Sunday) yesterday morning said that Air NZ would survive
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RE: Alliance Or Bust Says Air NZ Boss

Mon Apr 14, 2003 8:40 pm

New Zealanders and Australians need to ask themselves the following:

Do you want competitive airline ticket prices across the tasman?

Or do you want airlines from which to purchase tickets at all?

Fighting for the glory of the Australian Republic.
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 20, 2003 3:12 pm

What you dont understand is that AirNZ donot make money on ANY of its Intl. routes EXCEPT Japan!!
You say that if they focus on these cities then they will turn a profit!!! It does not work like that!
NZ's population is just too small, and what we get down here is mainly Tourists, which gives us low revenue!! SIMPLE.... no money made at all!

NZ, can ask any price on the Japan routes as they have no competition what so ever, therefore, even with their out dated product, it is the most convinient for pax to travel on, choosing them over rivals!

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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 20, 2003 3:59 pm

So, wait a sec. Are you saying that in the days of $200 million + profits, when Air NZ flew domestic routes at 55-60% loads, that that entire profit came from its Japan services only? I seriously doubt it.

And how do you measure a route's profitability anyway? Just becasue you lose money on a particular segment, you are still bringing pax into the market that could then go on to use additional services, helping to make them profitable. So one route wouldn't be (as) profitable without the other.

Hmmmm, gosh QANTASFOREVER, let me think about that. I think I'll take option 1 - competitive prices across the Tasman. Call me a down right competitionist if you will, I just can't help but be opposed to a monopoly. NZ will survive as a competitior.

Could someone please explain, with the consideration of competition rules (eg, dumping capacity etc), why Air NZ will shrink to a domestic-only airline if the takeover doesn't go ahead?
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 20, 2003 5:55 pm

Air New Zealand - Can you back up your comment about Air NZ not making any money on its intetnational routes ?

I can believe (if you believe QF and NZ) that trans tasman is not too profitable (if at all).
Flights from Japan - don't JAL fly into Auckland.
I woudl have thought South Pacific flights were profitable - as there is little competition.
Any whta about NZ1/NZ2 - I've flown this flight 6 maybe 7 times in 8 years and these - planes are alway full in economy or business - can't comment about first.
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 20, 2003 7:52 pm

JAL don't fly to New Zealand, they code share with NZ. The majority of South Pacific routes are strictly low yield tourist or VFR traffic, there maybe some money made but very little. Also a lot of the smaller Pacific nations have there own airlines now, and most of them fly to New Zealand, some of these airlines code share with NZ and a lot of them have NZ or QF involved in the management, but they still compete, ....co-operate but compete.
As for flights to the US and beyond, again most of it is low yield traffic, it is precisely this reason that most European airlines don't fly in their own right to this part of the world, preferring to code share with alliance partners or just abandoning it all together because their costs are too high and they can't compete with the Asian carriers in particular.
As for Trans Tasman, about the only time the airlines make money is Christmas, Easter and when there are rugby internationals and they charge full fare. Very few people travel on full fares, while there would be a reasonable level of business travel it is basically tourists and relatives travelling the ditch. Besides if VB is that committed to NZ and trans Tasman they should be encouraging this instead of doing what VB do, that is whine and moan that they are the underdog that needs to be hand fed everything. This would be the perfect oportunity for them, get their planes into AKL,WLG,CHC, etc and put their money where their mouth is, compete in a free and open environment, instead of what they have now, a huge percentage of a market because one airline went bust and the other major player just did not have the resources, or the desire to have 80%+ of the market. Get out and compete like most new entrants to the industry, if you have the product you will survive, if not shut up and be happy with what you have got.
I'll shut up now before I really say what I think of Virgin and their media tactics.
As I side note, there have been many airlines fly trans Tasman, with full traffic rights, among them UA/CO/CI/CA/BA, there still are GA/PH/WR/TG,MH,LA and AR, I'm sure there are more, if the route is a cash cow they would all still be doing it.
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RE: Alliance Or Bust Says Air NZ Boss

Sun Apr 20, 2003 8:25 pm

Actually, Air NZ is the only carrier from New zealand, which has a huge Cook Islander community, to the Cooks. And the fares reflect this, usually $1000 plus at least, while Fiji is more like package deals around $600-700. And even with Tongan and Polynesian it's still amazingly pricey to fly to those countries too. So I would think those markets are relatively high yielding.

The Tasman has always been difficult, but NZ is changing its structure later this year, using consistently smaller planes, higher frequencies and introducing elements of its very successful Express Class to the route. So what will QF's response be? What are they doing to reduce costs?

And yes I've noticed Virgin's seemingly contradictory arguments of late. They supposedly espouse competition, yet dont want the majors to have the ability too operate their own low cost carriers in direct competition with VB. Don't get me wrong. I flew on VB from Perth and they were great. Just part of the game I guess.

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