No matter one’s size, it pays to think big. Auckland Airport – major hub for New Zealand, a charming yet diminutive country with a total population of only 4.3 million people – has proven that with a masterstroke that has left other bigger players scratching their heads.
“It’s most definitely a coup – it is helping to put us on the map,” says Matthew Findlay, Auckland Airport’s route development manager. “We know that some airline executives have asked: how does that happen? For others, it made them sit up and wonder: what are we missing?”
Findlay is referring to the tie-up with Continental Airlines (now merged with United Airlines) that will see Auckland land the first B787-800 Dreamliner service in the southern hemisphere. The newest addition to the Boeing fleet has long-range capability, and its lighter weight improves fuel efficiency and allows for increased cargo capacity. Passengers are likely to be more impressed by the aircraft’s lie-flat seats, huge windows, and an onboard humidity control system that is designed to mimimise jetlag.
The planned Continental Airlines route will connect Houston, the fourth largest city in the United States, with Auckland.
Finding a niche
Conceding that this route announcement was “something out of the box”, Findlay notes that this is precisely the strategy that Auckland Airport’s management has been pushing: “Think outside the box, and carve out your own airline niche to maximise your profits and returns for your airline shareholders.” The alternative? “Why continue to compete in an already crowded market?” Findlay responds.
Yet he rejects any David–Goliath inference. “Size isn’t everything. How can that work? It’s not just about the size of the two city pairs – it’s about the networks at either end that can provide all the necessary feed with partners. In addition, there is a large market of Americans who want to get here – Tourism New Zealand calls them the ‘Active Considerers’ – people who know about New Zealand, want to come for a holiday, but haven’t to date for a variety of reasons.”
Besides, says Findlay, Continental “knows what it is doing”.
The US is the third largest source of tourist arrivals to New Zealand, and a significant trading partner for the Kiwi economy. “Access to an interior point in the US, which is also a member of the Star Alliance and will work with Air New Zealand, ticks all the boxes. It broadens our connectivity to states and cities east of the Rockies, that in the past have seemed too remote for many Americans.”
The Continental deal was a result of two years’ work, and Findlay is understandably chuffed with the result.
“To have the B787 announced first for Auckland was ‘best in class’, world first stuff,” he says. The outcome was even sweeter considering that discussions took place during an economic slowdown from 2008, when trading conditions were tough.
“We worked very hard on this, with almost two years of constant discussions, regular visits, and engagement with a huge number of people at different levels in both business and community groups, and local and state government agencies,” says Findlay. “I even attended Rotary meetings in Houston to push the message on one occasion. I’d hate to admit how many times we visited Continental Airlines, but each time we learnt more. They came to trust us, and, I hope, they chose us to make the announcement because we’re easy to deal with. They could have decided to fly that plane anywhere in the world, and they chose us.”
However, frustrating delays in delivery of the aircraft to many airlines have pushed back the start date of this service several times – the current estimate is 2012. Despite the wait, Findlay says that at Auckland Airport “the aprons are ready, we have the capacity, and can’t wait for it to arrive”.
Encouraging airline growth
Exciting as it is, that’s not the only route development making news in Auckland. Facing the economic downturn, with profits and passenger numbers flat, and the airport’s share price feeling the pinch, management’s focus has been on carriers with growth aspirations and/or the ability to grow.
Findlay explains: “Encouraging an existing carrier to grow frequencies is just as important to us as a new market entrant, particularly from a new destination or source market, such as Guangzhou in China. We’re proactive in working with and talking to airlines, and diversifying our markets is also a good way to protect against one market that may suffer in any given event – from, say, unfavourable weather, economic downturn or political unrest – and provides exposure to other strong markets.”
As a result of these endeavours, Auckland has welcomed a number of new or expanded routes. In January 2011, Taiwanese carrier China Airlines restarted its services to New Zealand after a 10-year absence. Auckland Airport’s chief executive, Simon Moutter, says Taiwan is a market of high growth potential for New Zealand, having recently loosened its visa policy to make outbound travel easier. “With a large migrant community in New Zealand, we believe a new service to Taiwan will be a great success and will help open up more of Asia to New Zealand.”
In April 2011, China Southern Airlines will launch direct air links from Guangzhou to Auckland, rather than routing via Melbourne, Australia, as was originally announced.
Moutter says this was in line with the airport’s strategic focus. “Auckland Airport is totally committed to growing the number of direct air links with China as quickly as possible to help ensure New Zealand gets its fair share of the fastest growing tourism market in the world. Having one of the biggest airlines in the world going direct sooner than planned is a fantastic result that will drive more visitors here and offer them more time to see what our country has to offer.”
Thai Airways marked its 50th anniversary in December 2010 by announcing a return to daily services to Auckland – up from five times a week – and adding an extra 60,000 seats to up its capacity by 40%.
Australia’s Jetstar started Melbourne to Auckland services in December 2010, and will follow with a Cairns service in April 2011. From March, Jetstar will launch a daily service between Auckland and Singapore. Malaysia Airlines, which last year celebrated 20 years of service to Auckland, will increase the frequency of its Kuala Lumpur–Auckland route to six services per week, adding around 30,000 seats.
Capitalising on Asia
These regional announcements are the fruits of the airport operator’s multi-million dollar strategy to develop the Asian tourism market. Moutter views this sector as “New Zealand’s best chance to surf the economic boom from emerging economies.”
According to IATA figures, Asia is already the biggest tourism market in the world, and is predicted to grow the fastest over the next 20 years. New Zealand’s hosting of the upcoming Rugby World Cup will be a major drawcard, bringing with it an expected NZ$507 million economic windfall.
Auckland Airport has invested significantly in air service development work over the past 18 months, but Glenn Wedlock, the airport’s general manager of aeronautical business development, says there’s no room for complacency.
“There have been many positive developments, but we still face challenges ahead. While we definitely need more capacity in some key markets, it’s not just about getting more planes here – policy and process factors such as visas, security requirements and air services agreements are also very important. Every part of the collective tourism team has a part to play.”
Yet he remains confident that with wider recognition of the importance and economic impact of air services capacity, the partnerships emerging between government and industry will provide a strong foundation for meeting tourism targets.
Strong US demand
Of course, the Auckland–Houston route will also benefit the airline. Alison Espley, United Airlines’ director for Australia and New Zealand, says direct access to such a key American hub will offer travellers seamless connections to many cities within the US, Canada, Mexico, Central and South America, as well as Europe.
“We foresee strong inbound demand from US companies in the Houston area, combined with demand from Australia and New Zealand outbound travellers who have business interests in the southern US, notably in the energy sector. Tourism is also expected to be a key driver as the direct service will connect travellers through to Latin America and Europe,” she says.
Despite delays in delivery of the Dreamliner, Espley says that Continental remains committed to the Auckland–Houston route, “which we are confident will be a success”.
“We are excited about the long-term opportunities in the region. As our president and CEO, Jeff Smisek, explained during his recent visit here, commencement of the Auckland–Houston route depends on delivery of the Boeing 787, because it offers the right capacity to match demand in the market.”
In anticipation of Boeing advising of further delays in delivery of the aircraft, Espley says Continental now plans to begin the service in 2012, rather than November this year as originally announced.
“While we are disappointed about the further delay in delivery, we are very excited about the B787, which will be a game-changer and offer unprecedented customer and operator benefits,” she concludes.
This issue features in Routes News 2011 Issue 2