Air NZ responds to The Listener
May 14th, 2010 at 6:36 pm by David FarrarIn response to the Listener’s editorial on the proposed alliance between Air New Zealand and Virgin Blue, Rob Fyfe has done this video response above, which is at Dear Listener.
I’m not convinced by the alliance proposal, but I do love the response by Air NZ. It really is first class.
Related posts:
- Air NZ and Virgin
- Gordon Campbell on The Listener
- Listener on DPF
- Listener takeover by NBR almost complete
May 14th, 2010 at 6:41 pm
I must remember the sign for “bollocks”
Vote:May 14th, 2010 at 6:53 pm
“I’m not convinced by the alliance proposal”
Yeah me neither. There’s no synergy from a service perspective. Which is possibli why they’re trying to distract frequent flyers from thinking too hard about the consequences. This response ad is classic Branson too. Wonder if he and Rob had a chat?
Vote:May 14th, 2010 at 7:16 pm
Typical Fyfe – all show, no substance.
Vote:May 14th, 2010 at 7:20 pm
Loved it. I’m pretty sure I will be using the sign for bullocks a lot more in the office. Thanks Rob.
Vote:May 14th, 2010 at 7:24 pm
Yeah typical. AirNZ has really languished on his watch.
Vote:May 14th, 2010 at 7:45 pm
“Yeah typical. AirNZ has really languished on his watch.”
Vote:It hasn’t really done much of anything different to what it has always done. He’s just this guy, you know.
May 14th, 2010 at 7:55 pm
That was pure win.
Vote:May 14th, 2010 at 8:05 pm
“all show, no substance”
Fyfe’s got lots of substance. So far from his record he’s been a good CEO given the way he’s navigated through the turbulence of what’s happened to the airline industry since he took it over from one of our best NZ CEO’s ever – Ralph Norris.
However, is this alliance a good move or a bad move, from a customer perspective? What’s the risk? It may be a killer business deal on paper, but in the uber-competitive airline industry where customer loyalty=zilch, will it work for bums on seats?
And if it doesn’t, what then happens to the shareholder: i.e. those of us who remain NET taxpayers?
What troubles me is that Fyfe and the journos haven’t yet explained how this deal helps expand routes and landing rights for that is where the real gains are.
[DPF: I agree that Fyfe has been an excellent CEO. As a shareholder in Air NZ, I think he has carried on the job of turing a near bankrupt airline into a profitable first class carrier.
As a passenger I am concerned about what this may do to fares on the trans-tasman route, but willing to be convinced by arguments]
Vote:May 14th, 2010 at 8:47 pm
Why would two airlines want to have an alliance on a route that has on average 80% of the seats filled? There is only one answer and that is to jack up the price.
Vote:May 14th, 2010 at 8:50 pm
The answer is probably both. There is huge overcapacity on the Tasman, especially with Emirates coming in with A380s.
What an alliance enables two airlines is to manage their schedules better and avoid flying on top of each other. They can either then re-deploy the planes offering better schedules / more frequency (good for customers) or get rid of aircraft or deploy them elsewhere (not that good for customers)
Reduction in capacity will probably mean slightly higher prices (not by raising prices but by making less of the cheapies available)
It is hard to compete with airlines that can offer fares based on purely marginal cost (all non-australian or non-nz airlines)
Landing rights are not important at all on the Tasman. It’s more about being able to connect to other points within Australia. For Virgin beyond NZ to the Islands and even supplement the new Longhaul flights.
It’s a hard question whether it is good or bad. You can find examples for either scenario.
But it is certainly a better option than the proposed Qantas alliance would have been.
Vote:May 14th, 2010 at 9:33 pm
Its apparently apology week – so I guess the deaf can now expect one for being compared to the Listener
Vote:May 14th, 2010 at 9:54 pm
Hi – firstly just to clarify the facts – our average annual load factor on the tasman is curerntly 70% – about 10% lower than the average across our network, and it is these low load factors that are the main driver of why the route looses money. The benefits we get from combining with Virgin are:
1. The opportunity to seemlessly connect customers from our 27 provincial airports to Virgin’s 34 airports in Australia with through bag check, lounge access, airpoint earning etc. At the moment neither airline can offer customers this breadth of network and I would hope customers value this.
2. Currently Air New Zealand struggles to compete to attract Australian domiciled travellers to fly on Air New Zeaqland across the Tasman because our brand presence is msall compared to Virgin Blue, Qantas and Jetstar. By working with Virgin we can use their sales strength in Australia to sell tickets on all our services and we can do the same on theirs – we hope we sell more tickets.
3. There are a number of marginal routes in the network, where one airline struggles to generate enough passengers to maintain a service, but working together these routes become far more viable.
4. So the end result for an Air New Zealand customer is that they get 50% more fligts they can book across the Tasman and earn airpoints on, they can fly seemlessly to 28 more airports than we currently service.
5. Without the alliance the status quo will continue – and we will continue to reduce our services across the tasman as we have been doing for the last two years with flights down by 10%, in order to stem our financial losses. Qantas and Jetstar will continue to grow and the end result will be fewer and fewer options for Air New Zealand customers.
As for whether I have any substance – thats for other’s to judge based on Air New Zealand’s performance – I guess just like the rest of our 12,000 staff – I try to do my best and hope we can make New Zealanders proud of their Airline.
Vote:May 14th, 2010 at 9:58 pm
Patrick – lol. And picking up that theme …
To all visitors to New Zealanders: We would like to apologise for the timing of National apology week. It seems that each year we are woefully inadequate in the planning of this important cultural ritual, and fail to scheduled it at a time where its impact on our international reputation generally, and tourism specifically is minimised. Please accept our most sincere regret for any inconvenience or offence caused to you, or members of your family, and rest assured that the people of New Zealand are committed to making good this wrong that has been perpetrated.
Vote:May 14th, 2010 at 10:17 pm
The problem is that Air New Zealand *is* offering lower grades of service on it’s Pacific and Australian routes. They’re offering different classes and some of them won’t quality for a meal, in-seat entertainment or even checked luggage. Read these scurrilous lies at the Air New Zealand website: http://www.airnewzealand.co.nz/press-release-2010-air-new-zealand-to-transform-its-tasman-and-pacific-island-services
Secondly, I didn’t see anything in the press release announcing the merger intention where it said that services would be raised to AirNZ’s standards. All I can find is a statement saying they’ll be consistent. http://www.airnewzealand.co.nz/press-release-2010-air-new-zealand-and-virgin-blue-airlines-group-announce-trans-tasman-alliance-proposal
Of course, didn’t Virgin Blue already offer those sort of low-rent deals without meals and so on? Looks like AirNZ might technically be correct – they’re not lowering their service levels due to the proposed merger because they’ve *already* lowered their service standards (starting from 29th April).
Maybe it’s just another smarmy PR video from Air New Zealand’s corporate spinsters.
Vote:May 14th, 2010 at 11:18 pm
Air NZ $1.23 going down dudes.
Vote:buy back in under $1.00
May 15th, 2010 at 12:31 am
The last Air NZ CEO to appear personally in the airline’s ads was probably that rather large Aussie in the ill-fitting suits, Toomey, who stayed with the carrier for about 9 months and departed with $3m+. Fyfe is both more capable and more photogenic than Toomey, so the comparison shouldn’t be taken too seriously. But at the time of Toomey’s on-air advertising blitz, some character sent a ditty from the advertising agency sector to the “Herald” which is worth repeating now:
If the client moans and sighs
Vote:Make his logo twice the size
If that isn’t satisfactory
Show a photo of his factory
But only in the direst cases
Should you show the clients’ faces.
May 15th, 2010 at 12:51 am
“[...] but I do love the response by Air NZ. It really is first class.”
I guess that depends on your experience. To my mind their response smacks of that smirking ‘air of superiority’ shown by companies that think they are beyond criticism. Now I have seen that it starts from the top I can understand why the staff behave the way they do.
Vote:May 15th, 2010 at 3:19 am
oh FFS, it’s a great ad, brilliant marketing. take it for what it is, don’t waste everyone’s time pretending to be expert in the actual BUSINESS of running airlines, something that maybe two people in all of New Zealand actually understand (and Fyfe is one of those two). Farrar liked it as a response to a hyped story. And as that, there’s no question of its value.
Vote:May 15th, 2010 at 3:26 am
It’d be great if Air NZ became a budget airline, I’d actually choose to use my national carrier then…
Vote:May 15th, 2010 at 8:27 am
Anybody notice sign girl is cute? I’m pretty sure I see her about once a month where I work.
Vote:May 15th, 2010 at 8:30 am
Francis: good call. Airlines must be one of the toughest businesses going. Not only do they have to solve a bunch of logistical nightmares day in and day out, but their competition is either government owned or government sponsored and willing to permanently operate without recovering their costs. Of course Air NZ is also in that category – government owned (mostly) – but they do seem to be making money. Good on them.
Hard to see value for the consumer in less competition, though. Suck it up and compete, Air NZ.
Vote:May 15th, 2010 at 8:43 am
Brilliant riposte..touchê.
Vote:May 15th, 2010 at 9:57 am
Excellent!
As for some commenters saying it was “typical” Fyfe – all show, no substance – I would note that I met a long-time Air NZ employee recently, and he commented that Fyfe was easily the best CEO they have had. Proactive, innovative, and willing to get out on the front line (literally – apparently Fyfe has his cabin rating, and sometimes flies as one of the cabin crew, serving drinks and meals and such). How many CEO’s do YOU know who get out there and experience the day-to-day work of their employees?
Vote:May 15th, 2010 at 10:04 am
FFS a plane is a bus with wings on it, it’s a means to get where you are going, not as some would have you believe a glamorous experience.
The only people that seem to be addicted to air travel seem to be our MPs with us paying, if they have to take their own sandwiches who gives a rats arse, perhaps it will discourage them from spending my money.
As for the Listener, it used to be a magazine, now it is just another sad little rag for the social elite, the best thing Rob could have done is ignored the wankers that run it and got on with his own job, instead of of spending gods knows how much, to prove he is cleverer than the tossers running the Listener.
Vote:May 15th, 2010 at 10:57 am
I just had a look at the Listener analysis. It is bad, in fact I think it is backwards. I’m pretty sure the main effect of co-operation between Air NZ and Virgin Blue will be to enforce a separating equilibrium, rather than destroy it. For some reason, the Listener thinks that Air NZ will downgrade quality to meet VB. I rather suspect the agreement would achieve the opposite: Air NZ agrees to target higher end customers, staying out of VB’s way, and VB agrees to target the budget end and stays out of Air NZ’s.
I’m not sure where the Listener thinks New Zealanders derive pride in Air NZ from. I think it is downright embarrassing to have the major carrier to NZ owned by the taxpayer. That is a very public symbol of a lack of business nous in New Zealand. I don’t know if the symbol is true – but a symbol it is. In contrast, having a national airline standing on its own two feet in an industry as tough as the airline industry would have been a very public signal of business competence.
Vote:May 15th, 2010 at 11:06 am
As Mastercard would say: “Priceless”.
Vote:May 15th, 2010 at 11:28 am
My response to Mr Fyfe’s comment above. In his defence, the Listener article was badly defective. But his argument has severe difficulties:
Hi – firstly just to clarify the facts – our average annual load factor on the tasman is curerntly 70% – about 10% lower than the average across our network, and it is these low load factors that are the main driver of why the route looses money. The benefits we get from combining with Virgin are:
You have a problem to solve, and your proposed response is to write an agreement with a competitor to reduce capacity. Let’s call that what it is: collusion.
Let me say up front what is missing from Mr Fyfe’s argument, as briefly presented here: an explanation for why competition in his industry is not valuable the way it so plainly is elsewhere. Isn’t there value for us, the consumer, in him solving his problems through competition by innovating, the same way Coke and Pepsi, TVNZ and TV3, and Harcourts and Tommys do? What is it about airlines that is special?
1. The opportunity to seemlessly connect customers from our 27 provincial airports to Virgin’s 34 airports in Australia with through bag check, lounge access, airpoint earning etc. At the moment neither airline can offer customers this breadth of network and I would hope customers value this.
Yes, I can see a benefit here. Can’t you write an agreement with these carriers that does not involve reducing competition in other ways?
2. Currently Air New Zealand struggles to compete to attract Australian domiciled travellers to fly on Air New Zeaqland across the Tasman because our brand presence is msall compared to Virgin Blue, Qantas and Jetstar. By working with Virgin we can use their sales strength in Australia to sell tickets on all our services and we can do the same on theirs – we hope we sell more tickets.
Ok, you have a brand Australians don’t much like. You aren’t the first New Zealand company to suffer that problem. The question then is why your brand weakness for some of your target audience justifies what would probably be an exemption from competition policy. Brand competition is valuable, and if it turns out your brand isn’t much liked in some markets then get a better brand. Launch a subsidiary with a brand Australians do like. Run a campaign to convince Australians you’re worth their time. Again the question is why it is in the consumer’s interest to let you collude to fix your brand weakness.
3. There are a number of marginal routes in the network, where one airline struggles to generate enough passengers to maintain a service, but working together these routes become far more viable.
Why should anything other than competition decide who services those routes? The same competition that saw the Warehouse rise to dominance and KMart exit the market. The same competition that saw Trademe beat EBay. Customers lose when competitors collude. We rather like having the better provider, not the most-lawyered, provide service. Again, it would helpful if you could explain why competition – so valuable elsewhere in the economy – isn’t in the consumer’s interest here.
4. So the end result for an Air New Zealand customer is that they get 50% more fligts they can book across the Tasman and earn airpoints on, they can fly seemlessly to 28 more airports than we currently service.
i) You can write a code share agreement without colluding to reduce capacity. Why does there need to be a quid pro quo? ii) you are defining the market too narrowly. There are airline customers, people who want to get from A and B. It is not the regulator’s job to ensure Air New Zealand customers get to fly more places on Air New Zealand.
5. Without the alliance the status quo will continue – and we will continue to reduce our services across the tasman as we have been doing for the last two years with flights down by 10%, in order to stem our financial losses. Qantas and Jetstar will continue to grow and the end result will be fewer and fewer options for Air New Zealand customers.
Regulators are not in the business of protecting competitors. They are in the business of protecting competition. Let us hope Air New Zealand’s favoured position in every aspect of New Zealand travel does not translate to favour before the regulator.
In competition it depends on who the efficient carrier is. You could innovate your way out of the problem – I’ll leave it to you to work that out – or you can exit. New Zealand gets better service when the efficient provider wins. I rather suspect New Zealanders get worse competition when the airlines lawyer-up to convince the regulator that, somehow, their industry is special and competition here infact is not in the consumer’s interest.
In summary: my take on Mr Fyfe’s position: he is transparently attempting to convert the (IMHO misplaced) goodwill Air New Zealand enjoys into a regulatory advantage. It is in his interests to do so precisely because collusion is profitable when it creates market power, as it is likely to do here. That market power is expressed through reduced capacity and, other things being equal, higher fares (demand curves slope down: less supply = higher price), and higher profits. Can’t fault Mr Fyfe’s business reasoning – collusion is good for his business. But it is hard to see how it is good for the consumer.
Vote:May 15th, 2010 at 11:33 am
I believe that Air New Zealand under Fyfe has had a major culture change. The staff are proud to work there and believe they have a CEO that has their back. This is a major contrast to what I encountered when I entered the travel industry 9 years ago, back then the staff were surly, unhelpful and unhappy.
This is a typical Kiwi response, well it was before we came over all PC. It is irreverent and funny.
Complainers get over yourselves and celebrate the push back of Kiwi humour.
Vote:May 15th, 2010 at 12:13 pm
Rob Fyfe –
I am a frequent trans tasman flyer and I prefer to fly Virgin/Pacific Blue. For me there are only two options, AirNZ and Virgin as Jetstar and Emirates don’t do a direct run to Brisbane from Wellington. There are a few reasons why I fly with your opposition.
Firstly, the price is much better. I really don’t see the difference in service apart from having to pay extra on Virgin for the crappy airline food – and even then it’s only about $10 for a meal. McDonalds at Johnsonville or Porirua generally get to serve me my meal anyway. I also note that your airline is the only one that doesn’t include all taxes in the initial page prior to booking – it’s on the second page, added just before you book.
Second, the Virgin staff are generally more polite and are always better looking than AirNZ. I have to say that Australian airlines in general do that far better. I have had good service once on AirNZ – it was the only time I’ve flown in business class. Sadly for me that’s not usually an option as I really don’t see the point for a 3.5 hour trip. Every other time I’ve flown AirNZ I have been disappointed with the stewardesses attitude towards customers, and tend to be snooty and up themselves. Contrast that to Virgin where you often can end up having a decent conversation with them, and are often keen for a laugh.
AirNZ also fly A320s across the tasman. I have a preference for 737s as they don’t tend to fall out of the sky for unexplained reasons – I remember thinking that all the unexplained crashes over the last couple of years were all airbus planes.
Basically that’s it in a nutshell. I would also suggest that the time of day for arrival and departure into Wellington should be changed. I know it’s really a problem with the domestic airport having to convert to an international one, but it is a real pain in the arse getting my parents to travel from the Kapiti Coast to either pick me up at 1am or drop me off at 5am. Yes, I know it’s not something that Virgin can do any better with, however you would have a bit more sway with the management at Wellington airport than I would, so if the flight times could be a bit more friendly that would be much appreciated. Failing that, if AirNZ had flights from Palmerston North or even Paraparaumu to the Gold Coast or Brisbane I’d be tempted to use your service then, all other things being equal (including price).
That is all, take it as you wish. But with one cartel running the route I regularly travel, all I can see is price rises, and that is why I hope that you fail in your attempt to get it through the competition regulators.
Vote:May 15th, 2010 at 12:36 pm
..kudos to Rob F for stepping up to the mark here on KB with an explanation.
Vote:May 15th, 2010 at 1:37 pm
Yes, they’re really good at over-exaggerating actions too…ha aha
Good ad, they shouldn’t worry, I don’t know too many who actually read the Listener these days.
Vote:May 15th, 2010 at 2:24 pm
starboard (983) Says:
Vote:May 15th, 2010 at 12:36 pm
..kudos to Rob F for stepping up to the mark here on KB with an explanation.
______________________
It’s part of the same well executed PR strategy that led to the huge over response to the Listener article in the first place.
It’s all about Air NZ pushing the benefits of the proposed alliance with Virgin Blue. Pure and Simple.
Don’t swallow it – develop your opinion about the alliance on whatever facts you can get, not on this extremely obvious spin campaign.
May 15th, 2010 at 2:30 pm
I’m an NZ shareholder and a pretty frequent flyer (3 x around Gold Elite last year). I was going to do a little fisking on my blog but it’s playing up so here’ll have to do.
The Dear Listener viral is funny but a little disingenuous.
Far from the Virgin offering being inferior to Air New Zealand and thus having to come up to scratch I posit that the situation is just a tad more complex.
When you look at the new Air New Zealand ‘choice’ offering you’ll quickly realize that, if anything, and even as a frequent flyer, it’s actually worse than what Virgin offer.
The Works Deluxe offering is about on par with the Virgin Premium except that
a) On DJ Premium Economy gives a choice of a full range of F&B- not 100% sure what NZ will offer yet. It appears that extras are paid for so strike this as a net benefit for DJ.
b) On DJ the average seat pitch is 34″ whereas on NZ there will be a single (front) row of 35″ and the rest will be 32″. if you book late, i.e. last minute, there is a good chance that your Works+ seat may fall out of the ‘new’ Space+ (much smaller pitch than the old Space+) and therefore while you’ll have an empty seat next to you may find yourself ‘down the back’. Of course it’s equally likely that NZ will block the front rows for WorksDeluxe passengers thus giving lie to the recent letter from their head of shorthaul that Space+ had somehow been re-introduced- it may well have been but it does no good if you can’t book it!
You do get a bit of extra baggage on NZ 2 x 23kg vs 32kg on DJ though I’m not sure if DJ Gold will get you an extra 32kg in which case they’re equivalent at the Gold status level. You can also probably sneak two for the price of one in WorksDeluxe (at least as far as seating is concerned) by booking one pax into WorksDeluxe then the other as SeatOnly; seat next to each other with the middle seat empty, share the complimentary food and take a bag each. Not quite sure if that’s the behaviour NZ is aiming at though.
When it comes to the rest of the fare classes it’s a very mixed bag. On DJ you have the option of buying a lower cost fare, sans bag, sans food but then purchasing a Blue Zone seat and getting a LOT of extra leg room- like 35”+. You can then choose which food you want to buy which is not altogether a bad situation. Of course if you are a Gold/Gold Elite or Koru member on NZ you can take your chances getting one of the ‘new’ Space+ seats but again, good luck if you’re a last minute traveller and they’re not exactly going to be roomy!
The baggage for frequent flyers situation is interesting if a little uncertain at the moment. On DJ, Gold gets 32kg regardless of fare type, Silver gets 23kg regardless of fare type. It appears that on NZ a Seat only fare means just that regardless of your airline status. Indeed I just called the Gold Elite helpdesk who confirmed this as being the case: Exactly how this reconciles with the 20kg or 1 extra piece policy of the Star Alliance I don’t know but I was told that neither my Air New Zealand Gold nor Singapore PPS membership would entitle me to any baggage in a Seat Only fare. If this is truly the case then the first flight this affects me will surely be my last on any sector where NZ has competition- I’ll call up QF as I’m sure they’d love my longhaul business. Even UA, US and CO provide a free bag (usually two) regardless of seat class to high value customers indeed even DJ do so chalk another one up for them.
So. While Air New Zealand have done a rather cutesy viral video claiming that this Listener has disparaged them and explained, in sign language, that in fact Virgin will be coming up to the Air new Zealand standard nothing could be further from the truth. A little more listening on the part of Air New Zealand is called for methinks- PR smoke and mirrors only gets one so far. Based on my fairly detailed examination and thought about the differences between NZ and DJ I can’t actually think of any situations where DJ is of a lesser standard than the new ‘Choice’ offering. As a shareholder I understand that NZ have to do something to shore up that route, but, they’ve jumped the shark on this one I’m afraid.
Well done to Rob for jumping on here: NZ have done a great job of running with social media (@flyairnz, @airpointsfairy and indeed this video had it been a little more honest are all good examples). I’d love Rob to address some of the above points and indeed for either Rob or Bruce (head of Shorthaul) to tell us how the new NZ trans-tasman offering is better than that on Virgin and exactly what changes Virgin will be having to make to come up to scratch as part of the alliance?
Vote:May 15th, 2010 at 2:42 pm
NZ staff will be training V staff in over familiarity.
Vote:May 15th, 2010 at 3:19 pm
“I try to do my best and hope we can make New Zealanders proud of their Airline.”
Have to say, the last time I went to the states I did feel proud that Air NZ offer such a good service, and a great way to finish my trip on a long hall 777.
Vote:Keep up the good work.
May 15th, 2010 at 3:26 pm
Yes, the halls are quite long on those big planes.
Vote:May 15th, 2010 at 4:48 pm
Lutzie
Ive not swallowed anything. I dont fly Air NZ as a rule for many reasons. As most know , I work in aviation so I have the good oil on Air NZ…and its antics… so to speak but I wont go there. I prefer Emirates as they fly out of chc to syd and bkk daily with very competitive prices, full service and lucious hosties. Next choice would be Jetstar then Air NZ.
Vote:May 15th, 2010 at 4:50 pm
Dear Rob
The sign language was excellent as I never listen to what you are actually saying as I am too busy visualising you with your shirt off.
Next video you do can you make it easier for the female audience and just take it off?
Regards
Vote:Cactus
May 16th, 2010 at 10:26 am
They had one. It was called Freedom Air and they set it up to take down a competitor. They shut it down when it was no longer useful.
Vote:May 16th, 2010 at 10:07 pm
gazzmaniac: good point. I just don’t see how Air New Zealand’s brand weakness in some markets is even relevant to the argument. Unless they are in financial distress, and the alternative is to shut down, then Air NZ’s business weakness in Australia is irrelevant to competition policy.
Vote:May 29th, 2013 at 11:04 am
Do you think the real reason Air NZ invested in Virgin was more about stopping them from setting up competing domestic operations in NZ with their turboprop fleet?
Vote: