I had the pleasure of speaking with Air New Zealand CEO Rob Fyfe this week on a wide variety of topics. Though his latest claim to fame might be that he’s the hottest businessman in New Zealand (no need to bother Googling, that’s him at left), he should also get the award for being one of the most successful businessmen in New Zealand. Air New Zealand has a very strong product and it continues to profit despite the downturn. We talked about this, the success of the airline’s new airport concept (which allows customers to arrive as little as 15 minutes before departure), and more in the interview.
The first half of our discussion centered around the airline’s latest, highly successful ad campaign where Rob and other employees took their clothes off. You can read that piece of the interview over on BNET. Here’s the second half of our conversation.
Cranky: So how is the new airport check-in concept working out domestically?
Rob: It’s going really, really well. There are a couple of challenges and we knew those challenges would be there because we’re asking people to change their behavior quite significantly. The big pluses, the kind of hero-aspect of the new proposition, is for our regular travelers [aka frequent fliers] getting the RFID tag on the back of their phone. It’s a little tag that’s an inch by a half an inch. You see people walking around displaying this almost as a badge of honor, like a membership in an exclusive club.
The benefit of that particular device sitting on their phone is what it means for the regular travelers domestically. We have far less complex security frameworks here in New Zealand than you have in the US, so that customer can now arrive at the airport and go directly through security. As long as they’re at the gate 10 minutes before the flight, all they do at the gate is they put this tag on the scanner, the device prints out a seat number, and they need no boarding pass, no e-ticket receipt. It typically means getting to the airport 15 to 20 minutes before flight departure.
Cranky: Wow, that’s unheard of in the US.
Rob: Yeah. And if you’re traveling with bags, that same passenger just puts the device on the kiosk, it automatically checks them in and prints out the bag tag. They take it over and put it on the conveyor belt. There’s no requirement to have any human interface, albeit we have plenty of help and assist staff to assist our passengers that are unfamiliar with the system. That same tag also gets you into the lounge. You swipe the tag and it says that you belong to the lounge. It also alerts our system that you’re at the airport and will be on time for your flight.
For regular travelers, it works really, really well. The challenge we’ve got is that it’s a re-education process for people – those people who now have to put their bag on the conveyor themselves, for example. It’s getting that kind of familiarity. You used to take that bag to the counter. Now the counter doesn’t exist anymore, so you just take that bag an extra couple of steps. It saves time.
The other challenge we find is connecting long haul passengers connecting into domestic flights. They have a lot of bags, but they come in relatively small numbers. We just make sure that they get the help they need.
Cranky: So there aren’t any changes you want to make to the system. It’s just an education issue?
Rob: Yeah. The system is working really well. It’s just an education process. At first we took the ticket counters away and we kept all the staff. In time, we would expect that through attrition, we would reduce the number of people there as passengers become more familiar with the process.
Cranky: Let’s talk long haul a little. How is long haul demand holding up lately?
Rob: Demand is down everywhere for us. Long haul demand is down 15% but capacity is down as well so our load factors are comparable year-on-year. The airline is still operating profitably. We reported a profit for our first half which was to the end of December 2008. Our second half we’d expect to be much more strongly profitable than the first half was. Part of the reason for that is although demand is down, Air New Zealand is predominantly a tourist airline so we don’t have the strength of business demand that other carriers have. The loss of the high-yielding business traffic is certainly causing a number of airlines to experience much stronger revenue reductions. The key for us is you just have to move quickly to adjust capacity.
Cranky: I have to ask you specifically about one of my favorite routes – LAX to London. I’ve flown your airline on that route before, and it’s been great, but it’s a funny route since you aren’t a British or American carrier. How is it doing? Is that something that you would consider cutting in a down economy? How important is London?
Rob: It’s a very important piece of the network for us. We’re predominantly an inbound carrier. About 70% of our traffic is inbound to New Zealand. After Australia, the UK is our second largest source of inbound tourists to New Zealand, so it’s very important for us to have it. We fly to London from both Hong Kong and LA. The LA route is the stronger of the two – probably because we get good support out of LA. Loads are quite good, albeit the yields are down. But like we say, we don’t have quite the same dependency on premium traffic that other carriers have.
Cranky: It’s anecdotal, but I know several people with smaller companies who don’t have corporate contracts who prefer to fly Air New Zealand to London every time.
Rob: We get great support from those who aren’t aligned with corporate agreements. We also get great support from the Hollywood movie industry.
Cranky: Thanks for taking the time to talk.
Can you imagine getting to the airport 15 minutes before departure and walking right on to the plane? If anyone has experience with the new airport concept in New Zealand, leave your thoughts in the comments down below.