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ATW's 2010 Airline of the Year - Air New Zealand
At a time when carriers all over the world are searching urgently for new business models in reaction to the downturn, ATW's Airline of the Year for 2010 has identified and is implementing a multifaceted commercial strategy that is paying dividends today while positioning it for greater success when the recovery arrives. Under CEO Rob Fyfe, it has established itself as a global leader in financial, operational, customer service and environmental performance.
In the fiscal year ended June 30, 2009--easily among the most challenging 12 months in the history of commercial aviation--ANZ reported a net profit of NZ$21 million, or NZ$118 million on a normalized basis excluding gains and losses on hedging derivatives relating to other financial periods. In doing so, it maintained a consecutive profit streak that has seen it earn NZ$902 million over the past six fiscal years.
Although profit before unusual items was down 20% in FY09 compared to the prior year, this must be seen within the context of industry losses estimated at more than $27 billion in 2008-09.
ANZ's financial strength lies at the core of its ability to develop its successful commercial strategies. It is one of just a handful of airlines still rewarding shareholders with an annual dividend, and it enjoys a Ba1 rating from Moody's. At the end of June, cash on hand as a percentage of annual revenue was 34%, which was at the high end for the industry. Adjusted gearing was 45%, putting it well ahead of the average for the US airline industry as well as a number of leading global carriers.
This strength also enables it to acquire aircraft at the bottom of the equipment cycle when substantial discounts are achieved more easily, as it did late last year with an order for up to 25 A320s. It maintains a mix of leased and owned aircraft to give it flexibility to grow or shrink with the market, which helped it shed 10% of capacity last year as demand fell. Average fleet age for the group's 47 mainline jets and 52 turboprops is just 7.5 years.
Operating on a global stage yet with a home market of just 4.4 million, ANZ faces unique challenges. Its international long-haul business is dominated by inbound travelers (an average of 76% in its seven largest markets), who usually have the option of choosing a national carrier to make their journeys. Lacking the scale or resources to "out-muscle" its competitors, it aims to be more agile and innovative and to offer customers the warmth and caring associated with the Kiwi culture from the moment they make the decision to choose ANZ.
According to a 2009 Brand Preference Survey conducted by TNS Conversa, 79% of Kiwi travelers favored ANZ over competitors, with 25% identifying it as the only company they would use.
Within NZ, 75% of travel comes from 25% of customers spread across two major islands. Understanding and meeting the needs of that segment are at the heart of its domestic strategy. Easy check-in through the Web, airport kiosks, 2-D barcode-enabled mobile phones and personalized RFID chips permit quick transit through airports. Customers traveling without a piece of hold luggage can check in at the completion of the booking, allowing them to arrive at the gate as little as 6 min. before a departure. More than 40% of customers now book online.
At the same time, ANZ will not permit itself to be undercut by LCCs and offers website features like Grabaseat, which attracts 100,000 visitors per day looking to take advantage of cheap seats. In early 2009 it set a record, with online sales reaching NZ$34.3 million in one week.
In the transtasman, probably the most competitive international market in the world thanks to a bevy of fifth-freedom carriers, ANZ is able to hold its own with passenger-pleasing technology like Panasonic's e-FX IFE on its A320s and 767-300s and a flexible fleet strategy that gives it the ability to operate four different types to Australia: 747s, 777s, 767s and A320s. The decision to refresh its 767s with the AVOD product enabled it to use them on longer sectors, which came in handy during the H1N1 outbreak, for example, when it was able to swap out larger aircraft as bookings on Japanese routes dwindled.
ANZ's operational performance supports its commitment to superb customer service. More than 80% of international flights arrived within 15 min. of schedule in July 2009, and for domestic flights, where it hews to a 10-min. standard, the figure was 85%. It has equipped six 737s and all 12 of its A320s with Required Navigation Performance technology, boosting schedule reliability at weather- and terrain-challenged destinations such as Queenstown. In FY09 it achieved a 19% reduction in mishandled bags; its rate is approximately 60% lower than the global average based on SITA data. In the first two months of its current fiscal year it improved baggage delivery by 37%.
The airline's Customer Support unit, composed of one manager and 10 specialists, answers all unsolicited customer feedback. In FY09, ANZ received just 12,000 complaints out of 12.3 million passengers carried. In addition to telephone and regular mail, customers can communicate via e-mail, RightNow and Twitter. According to the airline, 95% of all calls are answered within 30 sec. and it averaged a three-day turnaround for written communications last year.
It also has introduced International Airline Concierge Service: Specially trained representatives who provide customers on long-haul flights with advice on itinerary planning, airline processes and travel arrangements, accommodations, restaurants and so forth in the departure area, onboard and after arrival. The concierges are available to assist in the case of any inflight medical issues, or maybe just to give a youngster a walk around the cabin to provide parents with a bit of quiet time.
ATW recognized ANZ's superior customer service with our 2008 Passenger Service Award (ATW, 2/08, p. 34), but the airline has not rested on its laurels. Its latest innovations in Premium Economy and Economy, as detailed elsewhere in this issue (see article, p. 50), mark it as a world leader.
Underlying its success is its ongoing cultural transformation, a central aspect of which is leadership development. It recently launched the Centre for Business Leadership, an online resource for leadership development programs, articles and research. It has made reducing injuries on the job a key focus and has seen the numbers fall from more than 2,400 in 2002 to 350 in FY09. Its annual culture survey introduced in 2007 shows steady growth in employee buy-in for the leadership team's vision and strategy.
ANZ is committed to being "the world's most environmentally sustainable airline." It accomplished the industry's first sustainable biofuel flight at the end of 2008 and the first ASPIRE flight from Auckland to San Francisco, saving 7,700 lb. of fuel and 27,700 lb. of CO2 through a host of optimized operational and ATC procedures. It also participates in SFO's tailored arrivals program.
Fyfe says, "Environmental responsibility is a cornerstone of [ANZ's] flight operations." Since August 2004 it has implemented fuel-saving initiatives that eliminate in excess of 100,000 tonnes of CO2 each year and it has a target of increasing this to a minimum of 130,000 tonnes by December. Last fall it launched Airbus's "sharklet" winglets on its new A320s, which will reduce carbon output further, and it has equipped its 767s with Aviation Partners Boeing Blended Winglets.
ANZ's strong commitment to its staff, customers and shareholders and its embrace of environmental stewardship, combined with solid financial performance, make it a clear choice as the 2010 Airline of the Year.