s an end-of-the-line carrier located in a small country, Air New Zealand might well be expected to be a follower rather than a leader in the industry. But, as the online viral success of its latest television commercials show, innovation does sometimes originate in unexpected places.
28th Jan 2011
As an end-of-the-line carrier located in a small country, Air New Zealand might well be expected to be a follower rather than a leader in the industry. But, as the online viral success of its latest television commercials show, innovation does sometimes originate in unexpected places.
The television spots showcase Rico, an unspecified South American rodent, whose clumsy English leads to double entendres, sexual innuendo and other risqué humour that most national carriers would baulk at endorsing.
Jim Henson’s Creature Shop in Los Angeles created Rico at no small cost. But the investment appears to be paying off, with Air New Zealand’s adverts among the most popular items on the video-sharing website YouTube.
The reason for the big marketing push is the arrival of the carrier’s six Boeing 777-300ERs, the first of which was delivered in late December, and which will be pressed into action from 2 April on services to London via Los Angeles from the airline’s Auckland base, currently flown using 747-400s. The aircraft are laid out in several new seating configurations that are the result of a lengthy covert design programme begun in 2007 and transferred to the -300ER from Air New Zealand’s original order for 787-9 Dreamliners.
With some of the longest stage lengths of any international airline, Air New Zealand was keenly focused on improving passengers’ long-haul experience, explains Rob Fyfe, the airline’s chief executive. New Zealanders’ egalitarian streak also meant equal effort was put into economy class cabins as premium. Over 30 concepts, including bunk beds and cluster seats, were considered before the airline’s technical design team settled on a lie-flat seat dubbed the Sky Couch.
Stretched over three seats, the Recaro-built Sky Couch allows a couple flying together to purchase the middle seat in a row at half price, allowing them to stretch out.
The banks of premium economy Space Seats in the centre of the aircraft are angled together for couples, while those on the outside of the cabin are angled apart for solo business travellers. Built by Contour Aircraft Seating, the Space Seat design is owned by Air New Zealand, which aims to license the seats to other carriers. The -300ERs have new business premier seats too, which Fyfe claims move the carrier into the “hybrid first-business class territory” pioneered by Virgin Atlantic.
Fyfe’s joke-peppered speech hints at the unconventional thinking required to approve a mascot like Rico. He is also an aviation outsider, despite starting his career with the Royal New Zealand Air Force and being a graduate in Aerosystems Engineering from the UK’s Royal Air Force College. For over a decade, Fyfe has worked his way up the marketing departments of New Zealand and Australian banks before moving to London where he headed up the ill-fated digital television network ITV Digital.
Due to its South Pacific location, over 70 percent of Air New Zealand’s passengers are New Zealanders returning home, with the rest being tourists. There is very little transit traffic from long-haul services, Fyfe says. So the challenge is to market to the far-flung Kiwi community the advantages of flying with New Zealand’s national carrier, whose fares are unlikely to match Middle Eastern and Asian carriers on the routes.
“There is a sense of identity with the airline among New Zealanders, but that is not enough,” he says. “It must be mitigated by a clear business strategy [to be] able to compete.”
Part of this strategy is to team up with Australia’s second largest carrier, Virgin Blue. The alliance was approved in late December by Australian competition authorities, reversing an earlier interim ruling.
Air New Zealand previously had a close relationship with Ansett Australia.
Fyfe says that full code-sharing on trans-Tasman services will allow both Virgin Blue and Air New Zealand to increase services rather than shelve them, despite the combined entity now set to control the majority of capacity between the neighbouring countries, with Qantas and its low-cost subsidiary Jetstar reduced to second position.
Fifth-freedom rights allow offshore carriers to extend Australia-bound services onward to New Zealand. That right is being exploited by Emirates, whose Airbus A380 services to Auckland now account for around one-tenth of all capacity.
In this fiercely competitive market, Air New Zealand has responded by launching its Seats to Suit branded fare classes. Replacing two-classes of fares, the new single-class services are available on a seat-only basis, a seat-plus-baggage, a standard all-inclusive economy ticket branded The Works, or the Works Deluxe package that guarantees a spare seat next to the passenger.
Fyfe believes the branded fares provide a more sustainable revenue stream than simply stripping out ancillary services, as many US airlines have done.
Yet for all the renewed focus on long-haul and Australian services, Air New Zealand remains hostage to its country’s overseas appeal. Last year, long-haul tourism fell dramatically, especially in the UK, a core source market for New Zealand.
This was reflected in a 6 percent profit drop to NZ$137 million (US$105 million) for the carrier’s business year, ended June 2010. More drastically, passenger revenue fell by NZ$429 million, due to a 7.1 percent reduction in yield and a 4.7 percent drop in revenue passenger kilometres.
This September, New Zealand will host the Rugby World Cup, when an estimated 70,000 spectators are expected to visit the country. Despite his bawdy humour, Rico has over 15,000 followers on Facebook and over 350,000 people have viewed his best-loved video clip on YouTube.
The trick will now be to convert Rico’s fans into Air New Zealand passengers.