Marketing Strategy of Air New Zealand 2011

1 Introduction

Air New Zealand (ANZ) is a New Zealand (NZ) based airline company and its main goal is to become the best in every target market by creating a workplace full of people who are committed to customers in a distinctively NZ way. In this marketing strategy analysis report, a brief background of ANZ will be provided, followed by internal and external analysis. Next, a SWOT analysis output will be conducted based on the information from the internal and external analysis. With the output from the SWOT analysis, a new product will then be developed and a three months marketing plan will be presented.

1.1 History of Air New Zealand

ANZ first appeared in 1940 under the name of Tasman Empire Airways Limited (TEAL) and began with its operations using short empire flying boats on trans-Tasman routes only. The routes became wider after the end of the Second World War when TEAL started to provide services to Auckland, Wellington and Fiji. TEAL renamed into Air New Zealand in 1965 and started offering trans-Pacific services to the United States of America and Asia. At first, ANZ was under the control of the NZ Government but it was privatized it in 1989. ANZ then went through a really tough time in the next decade; however, it recovered in 2001 due to the NZ$885 million rescue plan from the NZ Government. From 2001, ANZ was continuing to grow and returned to profitability in the following years. Unfortunately, the profits of ANZ dropped dramatically in 2009 due to the global financial crisis and the increased in oil prices.

2 External analysis

A number of external factors could affect our ability to achieve our strategic goals and objectives, so the analysis is of those factors, including customers, competitors, markets and environment, is very important.

2.1 Customer analysis

ANZ targets business as well as leisure customers. To improve its customer orientation, ANZ continues to invest heavily in long-haul products (like "Skycouch", new space seats in the premium economy class, mew ovens and so on) and the services including all international services (seatback on-demand digital entertainment) and new long-haul direct services (Auckland-Vancouver, Auckland- Shanghai and Auckland-Beijing) (Star Alliance nd). As a

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result, the number of long haul passenger increased by 4.3% while the number of short haul passenger deteriorated by 1.7% in 2011 (Air New Zealand annual review 2011).

2.2 Competition analysis

Because of the high competitive pressure, which had caused Virgin Blue significant deficits, the company decided to withdraw its domestic operations from NZ in 2010. As a result, the market share of ANZ increased, and the competitive situation in the South Pacific market changed. Now the NZ market will become a duopoly (ANZ vs. Qantas/Jetstar) with ANZ holding 85% market share. However, Jetstar will continue to capture market share with the discount battle on domestic trunk routes, and they announced that they would grow the domestic NZ operations. Moreover, Qantas promotes operations in the domestic NZ market that attack some of the lucrative regional routes of ANZ (CAPA Centre for Aviation 2010). Therefore, domestically the main competitor of ANZ is Jetstar/Qantas.

2.3 Market analysis

The market of ANZ consists of 27 domestic destinations and 26 international destinations in 16 countries across Australia and Pacific Islands, United Kingdom, Europe, Asia and North America.

The profitability of ANZ decreases from $84m in 2010 to $73m in 2011 because of the impact of fuel cost and foreign exchange fluctuations. The earnings from passenger yield and passenger traffic are $103m and $194m respectively. ANZ has earned $33m from cargo volumes (increasing 8%) and yield (increasing 5%). The earnings from contract services and other revenue reached $61m. However, the expenses for labour, fuel, aircraft operations and passenger services, sales and marketing climbed which caused the decline of revenues. Net finance costs was -$16m, because the interest revenue fell from lower cash balances and the interest expense rose from higher borrowings reflecting the buying of Virgin Australia share and the investment in new fleet. Net impact of foreign exchange movements was -$95m (Air New Zealand annual review 2011).

On the Australian market, ANZ launched its successful „Big shout‟ campaign, which was in part supported by Tourism New Zealand‟s "What‟s on" campaign. The promotional campaign offered customers who bought a ticket to NZ a domestic flight for free. Also on the European market, ANZ continues the cooperation with Tourism New Zealand, which promotes NZ in outdoor and online advertising in Paris, Munich, Frankfurt, Hamburg and Zurich, and via an

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online campaign in the Netherlands. In Asia, Japan is a valuable tourism market, so Air New Zealand joined Tourism New Zealand and other trade partners in a major promotional campaign, which focussed on promoting experiences like kayaking and swimming with the dolphins to Japanese travellers. In China, Air New Zealand introduced new products which are supposed to meet the needs of this growing market, plus they increased the range of free independent traveller tour options and of honeymoon destinations. In US market, ANZ introduced a joint project that encourages the growth for long term in North America tourism to NZ.

2.4 Environment analysis

2.4.1 Political

The politics of NZ is a parliamentary representative democratic monarchy. NZ has no formal codified constitution, and the essential framework involves a mixture of various documents comprising acts of the UK and NZ Parliaments), the Treaty of Waitangi and constitutional conventions. NZ is divided into 16 regions and 73 territorial authorities with the governing of a council for each them.

2.4.2 Economic

ANZ has influenced from the global financial crisis along with debs problems confronting the USA and Europe, and high levels of fuel prices and exchange rates. The rise of fuel price and consumption brought about the higher fuel cost being ($145m) in comparison with the cost of 2010 period. Moreover, the stronger NZ dollar brings benefits that are the drop of costs more than the decline of revenue. Currency hedging programme (showing the loss of $118m for the 2011 financial year) with the lower of the effective hedge rate being comparing with the market rate delayed the full benefit of the stronger NZ dollar (Air New Zealand annual review 2011).

2.4.3 Sociological

The