Air NZ Puts Faith in Retooled Business Model

Air New Zealand is grappling with a dilemma faced by many other smaller international airlines: How do you defend your markets when the global heavyweights are doing battle in your backyard?

Finding an answer hasn't been easy, but Air NZ believes it has hit on the right formula to thrive in a tough industry environment. This has required a top-to-bottom shake-up of a formerly complacent national carrier, with a second wave of change on the horizon in the form of a major fleet upgrade.

The Asia-Pacific market is increasingly dominated by big airlines with aggressive expansion plans. Foremost among these is Qantas, with Singapore Airlines and Cathay Pacific also factoring heavily. Emirates is demonstrating the new reality in the region with its plan to bring the first Airbus A380 service to Auckland in February, seating up to 489 passengers a flight.

Air New Zealand CEO Rob Fyfe says the size difference can actually work to the airline's advantage. "There's a lot of airlines around us that are much larger. . . . We can't outmuscle them, [so] we've got to be able to outmaneuver them," he says. "We define speed [in making changes] as one of [our] key sources of competitive advantage."

Change has certainly been rapid during the past five years. The carrier has transformed its domestic service into a low-cost/low-fare operation, while the international route network has been streamlined and the product revamped.