Why Air New Zealand is more profitable than Qantas

By David Flynn, September 15 2014

It's a tale of two airlines: one that's very profitable, and one decidedly not.

One which is flying the world's first Boeing 787-9 jets, and one which has yet again pushed back its Dreamliner deliveries except for those flown by its budget offshoot.

Those airlines, respectively, are Air New Zealand and Qantas.

But their fates have now always been so far apart.

Both have faced the toughest of times, with cuts to routes and jobs, but also signed strategic alliances with other airlines in an effort to redefine their role in an increasingly competitive industry.

So how is it that Air New Zealand is now flying high with an A$300m profit while Qantas chalked up an underlying pre-tax loss of  almost $650 million?

Australian Financial Review aviation reporter Jamie Freed has penned an insightful piece which examines why the Kiwi carrier is now punching above its weight while Qantas fights a rising tide of red ink.

"There are several reasons why [Air New Zealand] is in a more privileged position than the Australian carriers" Freed explains, such as partial Government ownership and lack of competition in a smaller market. 

However, Freed adds that while some of those advantages "can’t be replicated easily by Qantas and Virgin, neither can the bulk of its success be put down to circumstance alone."

"AirNZ may have some luck on its side, but it has also made plenty of smart decisions."

Read more: AirNZ Australasian success story

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David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

21 Sep 2011

Total posts 65

NZ has a near monopoly domestically and a complete monopoly for all long haul routes ex AKL with the exceptions of HKG and SIN where revenue sharing alliances are in place with the only other carrier on respective routes. Does anyone need to say more?

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

KUL is not a monopoly, but your point stands.

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

/facepalm/ They don't fly to KUL.

QFF

12 Apr 2013

Total posts 1446

And what exactly wrong with that?

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

Why is NZ ahead of QF?

  1. Monopoly routes.
  2. Lower cost base.
  3. Higher loads.
  4. Newer aircraft.
  5. Government support.

Qantas - Qantas Frequent Flyer

20 Sep 2013

Total posts 469

Very well done..you did some research may be better and more experienced management,a more consistant service and structure.And you may also forget Qantas has received more goverment protection over many years than most all carriers flying today.

Virgin Australia - Velocity Rewards

06 Sep 2012

Total posts 213

Not to mention their asset management standards are more advanced than most countries, including Australia. 

QFF Gold QC gold

26 Nov 2012

Total posts 56

**drum roll** waiting for someone to smash Qantas management

Virgin Australia - Velocity Rewards

19 Feb 2014

Total posts 451

Any airline should be making money when they have a monopoly, and then completely naive when competition arrives.

21 Apr 2013

Total posts 34

air new zeland is better off  for these reasons

1: they bought new aircraft at the right time. eg(777 and 787)

2: goverment support 

3: they have a mangment team that has a good future plan and actually know how to run an airline 

4: they do not have as much compitition as qantas.

08 May 2013

Total posts 18

They also have a dream, innovation and excellent planning for the long term down the line which fits into your #3 point 

What's the point of comparing apples with oranges?

03 Jan 2013

Total posts 47

Why does AIZ make a profit? How about:

  • $NZ1.2B bailout 13 years ago by the NZ Govt.
  • Walked away from $AUD5B Ansett collapse for a blood-payment of $AUD200M.
  • 10 years of cutting staff and costs.
  • Benevolent shareholders (the NZ taxpayers).

It's easy when you can wipe the slate clean and essentially start from scratch.

 

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1137

"But their fates have now always been so far apart."

Assuming from context the word should be not instead of now.

QF NZ

28 Jul 2013

Total posts 27

Compare QF and NZ ?  simply fly SYD - AKL. on 737 - 320 to compare. The fares options are far better on NZ and with Works Deluxe you effectively have Premium Economy. Also the whole attitude / vibe is so different 

Graham

QF NZ

28 Jul 2013

Total posts 27

Further to this, it has been recently said:

QF is an airline run by accountants and staid

NZ is an airline run by marketeers and innovative.

Qantas - Qantas Frequent Flyer

19 Aug 2011

Total posts 155

It's easy to be simplistic about the differences, but it is more complex than some are saying.  Bear in mind Qantas did make a rogue bid for Air NZ/Ansett back in 2001 specifically to stymy the Singapore Airlines bid, and it succeeded, because the delays in approving the latter saw Ansett bleed so much red ink, it handed Qantas domestic dominance for some years.  The tables have turned somewhat.

Air NZ did get a NZ govt bailout then, but has had nothing since, and it remains publicly listed, and pays dividends.  You can put this down to the following:

- Dominance domestically. It has grown this business by keen pricing, while avoiding competition on all but the main trunk route (where Jetstar doesn't have the frequencies to compete on the high yielding business traffic, nor the perks like lounges or larger pitch seating for premium frequent flyers).  It bought three smaller operators over the years which have much more competitive costs than it had with its legacy operation.

- Tasman/shorthaul ruthlessness on costs.  It has worked hard to get costs down and to put in products that focus on the main leisure market and enough business travel to make this work, but the partnership with Virgin Australia has been critical in providing a feed at the Australia end.  Short haul to the Pacific faces limited competition as well.

- Long haul lack of competition. It has culled most marginal routes (e.g. Beijing, Christchurch-LAX, HKG-LHR) and all that remain are monopolies except Honolulu and LAX-LHR (which has high yielding point to point traffic to help sustain this one route from AKL-LHR, unless QF on LHR-DXB).  HKG has been secured by alliance with CX, SIN is being started with an SQ alliance.  NRT survives in partnership with ANA (before than JAL), and PVG is a gamble on long term growth.  N.Am is lucrative and picks up useful traffic from Australia, partly because QF pulled out of AKL-LAX, and US carriers haven't returned to NZ. 787s may change that.

- Smart fleet management. Going early on 777s for growth and to phase out 747s has saved a fortune in fuel and helped grow cargo, and A320s have been doing the same against 737s.  

- Partnerships with whoever helps the business.  Beyond Virgin Australia/Star Alliance, NZ's partnerships with CX, VS, BA, AF/KL and ET have all been about being the main feed for traffic to/from NZ and to be relaxed about who it feeds given its dominant monopoly operation.

- Ruthless cost/yield management.  Whether it be charging for seat selection, OneUp bids for upgrades, higher density seating on 777s in economy, Skycouch, disaggregating products on shorthaul/domestic, or cutting niceties in premium cabins, it has become keen on generating revenue and reducing costs that don't add to demand/market share.

NZ being a small market has not been worth many foreign airlines servicing.  QF has become less of a competitor, and while EK is important, it always operates via Australia, so has a disadvantage for some high yielding traffic to Europe as it is always a two stop trip to Europe, unlike Air NZ with its partners.  Partnering with SQ and CX effectively removed the two biggest competitors to Asia and Europe.

Bear in mind also that Australia's geography and SYD capacity constraints restrict one hub being dominant, which makes it harder for QF compared with competitors which can more cheaply operate to multiple airports, compared to QF seeking to operate long haul from multiple airports.  NZ has only AKL and concentrates long haul from there.  

30 Aug 2013

Total posts 448

I think NZ's ruthlesness when it comes to costs has been one of its strongest assets. It makes plenty of very unpopular decisions that people whinge about but they live with. QF seem to be taking more of a 'lets still have a nice national airline' approach to cost management whereas NZ have a much more sharply focused 'lets reduce every cost we can' approach.

For example, NZ hardly provide any award seats to partners (none TT even in Y). This is unpopular and people whinge about how NZ aren't 'playing their part' in *A but people live with it and it saves them money. Same goes for the poor value of the Airpoints program, the 777 10 abreast Y seating, confusing LCC-type fare classes TT etc. People dont like these decisions, but they live with them.

htc
htc

Qantas P1

18 Jan 2012

Total posts 73

Biggest difference is staff attitudes...

- AIR NZ staff want to be there, when they say they are there to help - they geninely mean it, they aren't driven by penalties, overtime, loadings or allowances, also help to find a resolution - particularly for higher status pax, they don't pass the buck.

QANTAS staff more often than not, do not want to be there. They are there for the perks, the cheap First travel, weekend loadings/allowances/penalties, the extra super, bludge the day and not take ownership of tasks. The number of times I hear CSM say "if we can do anything to help, just press your call button" and when you do it's like asking them for their left arm..... Better off not saying it.

I hold high status with both, and fly on both a lot. I am more loyal to Qantas given the P1 team and the assistance they give... and my huge amount of AU domestic flying. However, long-haul business is a no brainer.... NZ's J product and people (**smile**) trumps QF J & F.

 

IMO

16 Sep 2014

Total posts 3

NZ have innovation...

Qantas has none... Just follwers when they have no other choice!

QFF

12 Apr 2013

Total posts 1446

Qantas lost government support when became public company and lost semi-monopoly when aviation was deregulated. Both decision was stupid and bring best-for-decades airline to its knees. In the past Qantas could dictate with whom make aliasing and with whom not while now Qantas looking to whom jump into bed. Sad story really.

31 Jan 2013

Total posts 35

Many have mentioned the NZ almost monopoly on domestic. Keep in mind that QF, VA and JQ have all tried to get in on that market. There's no law that makes it a monopoly so I have to assume that NZ has been able to keep their dominance by offering a product and fares that have been keeping the Kiwis happy.


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