National carrier Air New Zealand is undergoing a major review of its long-haul flights. Though it posted a net profit of NZ$81 million ($62 million) for fiscal year ended June 30, 2011, its international network has been under pressure, losing a million dollars a week. CNBC's Christine Tan caught up with CEO Rob Fyfe to find out what is his long-haul strategy.
Q: You're undergoing a major review of your international network. What are some of the changes you're hoping to make?
The big challenge for us, because we're a tourist airline, is we don't have nearly as much business traffic as many of our larger hub-based airlines, you know like Cathay or Singapore. So we tend to get a lower yield per seat, and that means we have to keep the cost base very competitive. So we're constantly looking at innovations (as to) how we can enhance our yield.
It's about finding good partners to work with. We've just developed an alliance with Virgin Australia, and that will be revenue additive to our business. We're also looking at partners in other parts of the globe. We've got a co-tier relationship just set up with Virgin Atlantic, looking at ways we can feed more passengers and higher value passengers onto the network.
So we're not going to solve the problem by cutting costs, which is what a lot of airlines will do. We're looking for ways that we can generate incremental revenue.
Q: So you're not laying off staff on your international network?
No, no. In fact we're growing at the moment. We just want to grow more profitably.
Q: When do you hope to make money on your international network?
By the end of this year, our international network needs to be profitable. I'm confident it will be.
Q: New Zealand relies mostly on tourism flows coming into the country. Is the high profile Rugby World Cup held here in New Zealand what you need to boost profits for the airline?
We are counting on it. It's a really important catalyst for us. We think we'll generate an additional NZ$30 million worth of revenue which will largely fall straight to the earnings line.
Q: 30 million dollars. What sort of timeframe are you looking at?
We'll generate that over the six week period of the tournament, and then we hope that we'll continue to benefit from the profile that New Zealand gains through the tournament as it's broadcast to many, many countries around the world, so that will raise the profile for all-round tourism.
This is an excerpt taken from CNBC’s longest-running feature program Managing Asia. Catch the show with anchor Christine Tan over the weekend on CNBC.