Air Transport World

Air New Zealand facing new challenges at home, seeking adventure abroad.

Air New Zealand facing new challenges at home, seeking adventure abroad

Sometimes adversity can be good for people, institutions and even airlines. The challenge of making it in hard times produces more efficient operations and a stronger framework for future challenges.

On the other hand, prosperity can sometimes cause problems for people, institutions and especially airlines. In the airline business, especially the deregulated one in the United States, too much success can attract more competition. Although not a U.S. airline, Air New Zealand has experienced all of the above in the past five years or so.

At the beginning of this decade New Zealand's national airline was in trouble. It had recently gone through a merger with the domestic airline, New Zealand National Air Carrier Corp. (NAC) and the problems of overstaffing sometimes associated with such pacts between government-owned airlines. It was losing a lot of money, partly because of the world economic recession. It also suffered a tragic accident which brought it's management's competency before a government review. Air New Zealand was going through some very difficult times.

In February 1982 a new management was brought in, headed by ex-British Petroleum (BP) executive, N.M.T. Geary, with a mandate to make changes and improve the airline's efficiency and profitability. Basically Geary was told to make Air New Zealand a viable commercial enterprise. He did.

The change that has taken place at Air New Zealand in recent years has been astounding. When Geary took over, the airline was about to report FY 1982 net losses of nearly NZ$50 million on revenues of only NZ$652.5 million. It had a NZ$30.6 million net loss the previous fiscal year ending March 31, 1981.

In its most recent financial report for the year ending March 31, 1986 Air New Zealand reported a NZ$184.3 million profit on revenues of NZ$1.3 billion. The efficiency improvements are as remarkable as the financial. When Geary arrived, Air New Zealand was performing at standards below those of the average member of the International Air Transport Association (IATA). In 1985 the average IATA airline was carrying 496 passengers per year for each employe. It was generating 874,917 RPKs per employe. In calendar year 1981 Air New Zealand was carrying 484 passengers for each employe and generating only 684,457 RPKs. By calendar 1985, the airline was carrying 675 passengers for each employe and was generating 1,072,016 RPKs. That is a 39.5% improvement in passenger boardings per employe and a whopping 56.7% gain in RPKs per employe. When Geary took over, Air New Zealand was taking in NZ$86,933 per employe. By 1986 it was taking in NZ$166,253. Using the 0.56 conversion of March 31, 1987 that is U.S. $48,682 and U.S.$93,101 respectively. In 1986 American Airlines, one of the most efficient airlines in the world, took in $113,279 for each of its employes. So, Air New Zealand has made astounding progress.

More business, less staff

The way Geary likes to put it, "We are doing nearly 50% more business with about 20% less staff.' He points out that Air New Zealand has produced about NZ$454 million in profits over the past four years. …

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