Thoughts from the New Zealand Aviation & Corporate Travel Summit 2018

    The New Zealand Aviation & Corporate Travel Summit held by CAPA – Centre for Aviation returned to Auckland over the last two days to dissect the state of New Zealand aviation. During this event, we were joined by leaders of the travel industry and corporate travel professionals all delivering thought provoking discussion. Some of the key themes which emerged include:

    Keynote wrap up

    Auckland Airport CEO Adrian Littlewood, stated:

    • The airport has seen “extraordinary” network expansion in the last few years, which sets the context and foundation for “what is to come ahead of us”. He noted passenger traffic has grown dramatically between 2012 and 2018, with a 44% increase in that “extraordinary period of growth”. Mr Littlewood noted the growth has been “far stronger” than anyone expected, and “double what had been forecast in 2012”. “Growth has outstripped every forecast since 2013”, he added. This is a “pretty extraordinary” change in a market that has been “fairly flat” in the past 10 years.
    • Facebook data found 118 million people are “actively” looking at travel to NZ. He pointed out New Zealand is “not alone”, with this tourism phenomenon occurring across the world. Iceland’s tourism has grown 20% p/a since 2010, which equates to five visitors per resident. New Zealand is competing with Austria and Iceland for the same markets, however they are all wrestling with the same issue of how to address the tourism boom. It is a “positive” challenge, he said.
    • Things are changing and they “need to”, with billions of new investment slated for infrastructure development in Auckland alone. There is an “awful lot to do”, Mr Littlewood said, and the country needs to have the “machine of supply” of contracting complex construction services in place.

    Air New Zealand chief revenue officer Cam Wallace, stated:

    • Digital change and innovation is a “big challenge”. He noted New Zealand is becoming more attractive to international tourists with more airlines coming in, and Air New Zealand is responding by trying to be on the “cutting edge of innovation and change”.
    • Distance is no longer a challenge with long range aircraft, which in turn opens up opportunities for customers and business. The challenge and opportunity will be taking passengers point to point, “to where they want to go”.
    • The airline is focused on its loyalty business, and now works with 62 different partners. Air New Zealand has close to three million loyalty members, Mr Wallace said, and is “well-endorsed” in the context of New Zealand.

    Virgin Australia Group CEO Rob Sharp, stated:

    • The termination of the airline’s alliance with Air New Zealand, wasn’t a “total surprise”. He said: “We were disappointed because we see value in those sorts of partnerships but we’re quite comfortable to compete”.
    • The carrier sees New Zealand as an important market to be in. He noted there are “sound economic reasons why we’d want to be there”, including corporate travel.
    • A lounge proposition is a “missing piece of the jigsaw puzzle”, Mr Sharp said, highlighting the airline’s recent announcement to open seven international Virgin-branded lounges geared towards the highend premium market. He described the airline’s service as a full service proposition in a simplified structure that is easy to sell. Mr Sharp also pointed out that lounges have grown to the point of congestion, and opening new lounges will help its overall product proposition.

    Battle on the Tasman

    Qantas Airways executive manager sales and distribution Igor Kwiatkowski stated that while there has been a “lot of talk”, its agreement with Air New Zealand is “just a codeshare” and not a “centrepiece of what will happen across the Tasman”. The agreement will extend customer benefits, he added.

    CAPA – Centre for Aviation executive chairman Peter Harbison stated he does not think the entry of Tigerair to the trans Tasman market will happen “very quickly” because Virgin Australia is “not in a position to expand rapidly”. He added it may take at least a year to see how things will unfold.

    Air New Zealand chief revenue officer Cam Wallace stated the airline can compete aggressively with anyone on trans Tasman routes, without any alliances. He noted there has been “some confusion” regarding its deal with Qantas, stressing Air New Zealand is “not switching from Virgin to Qantas”. The codeshare agreement is just providing end access for those connecting onwards.

    Forsyth Barr head of research Andy Bowley stated that he wonders if Virgin Australia shareholders have the “appetite to fight in a hard market” in light of the codeshare agreement between Qantas and Air New Zealand. He noted it is a “big question” whether Virgin’s shareholders would support buying capital to “do that kind of challenge”.

    The New Zealand Herald deputy business editor Grant Bradley stated he wonders what is further down the track in terms of how the Qantas/Air New Zealand deal will bear down, and “whether there’s anymore on the horizon … if it’ll be a deeper relationship”. He noted the Virgin Australia response was ” surprisingly forceful” and the “way they’ve come back was quite strong”.

    NDC

    Travelport commercial director Sue Carter stated:

    • NDC is a standard, and not a technology, system or service. Ms Carter said NDC and the coding for APIs will “take some time”, and expects to see a “combination” of NDC content and coding over the next five years or so. She noted Travelport has spent five years preparing for the shift to NDC, and believes it will be a “bit of a journey”.
    • All parties will need time to adjust to commercial and technology model changes, but ideally the experience shouldn’t change between channels.

    Serko CEO Darrin Grafton stated:

    • All the travel management companies “had their head in the sand” a year ago with regard to the NDC, until airlines began to shift and adopt it in 2018. The momentum in 2018 has had GDS and TMCs “all start to look”, he added.
    • The choice of which channel to use is “always going to exist” through the GDS system, and they’ll manage the content and speed of access. He anticipates a disruption of source will occur through distribution.