Distribution Strategy For Air New Zealand

Literature Review

Describe about the Distribution Strategy for Air New Zealand.

Air New Zealand operates as a national airline of New Zealand and it is based in Auckland. The company strives towards operating scheduled passenger flights to both the international and domestic nations. There are 22 domestic and 29 international destinations in 16 countries that the airline offers its services. It also offers cargo transport services within New Zealand and to and from pacific Islands, Australia, North America, United Kingdom and Asia. The airlines carry 38,000 customers every day and operate around more than 3500 flights each week and it operates 3000 domestic flights in New Zealand (Airnewzealand.co.nz, 2016). On the other hand it moves over 37 million kilograms of cargo freight from New Zealand to other destinations every year and the company operates with an employee base of 11,000 skilled, knowledgeable and talented employees across the globe.

Air New Zealand has been successful in achieving inherent competitive brand strength that has not been replicated by any of its competitors not by any of its marketing strategies. The airline company has won more Air Transport World’s Airline of the year award in previous years in comparison to any of its competitors and thus it has been successful in proving the fact that a tiny country that lies at the bottom of the world has for the second time in three years shown the aviation industry that their airline can be relied upon to be the best flying (Marque.co.nz, 2015). The success of the airline company can be related to its core strategies that include the following:

Employees and people

In the early times, Air New Zealand used to view their planes as the most valuable assets but with the passage of time they recognized the value of human resources that involved both the internal and the external customers (airnewzealand.co.nz, 2015).

Industry innovation

The company recognized the fact that it is better to innovate than die and thus it introduced the following innovations:

The company introduced self check-in and gate scanners that ultimately reduced the check-in process to 1 to 3 minutes from 10 to 15 minutes.

Where most of the airline companies worked on making incremental changes to the premium class, Air New Zealand emphasized upon improving its economy class (Marque.co.nz, 2015).

The company introduced Skycouch that facilitates its customers to enjoy the lie down experience without being upgraded to premium class.

Distribution Strategy

Kiwi experience

Air New Zealand emphasized upon offering a 360 degree kiwi brand experience with the help of its customer service and product quality.

Thus it can be said that the above aspects has facilitated the airline company to enjoy a better position in the market in comparison to its competitors with around 38% of the market share. The market share of Air New Zealand and its competitors can be illustrated with the figure:

[Source: Centreforaviation, 2010]

With the passage of time, things have changed and huge technological advancements have taken place especially the development of internet. So this has led to the changes in the ways in which the products and services are being distributed to the customers (Christodoulidou et al., 2010). So this has made a significant impact on the tourism industry. The studies conducted by Dabas and Manaktola,  (2007) reveal the fact that in the traditional distribution model, the travelers have to heavily rely upon the traditional intermediaries i.e. the travel agencies to access the products and services that are produced by the suppliers. However, internet facilitates the travelers to have an easy and direct access to the travel information and make their bookings without having to approach the intermediaries. In this context Kaewkitipong,(2010) proposed the fact that with the passage of time, various online intermediaries like the Online Travel Agents, flash sale websites and last-minute distribution have emerged that provides the platform to the travelers to make their tourism purchases.   

Thus taking into consideration the above facts, Law et al., (2004) opined that the traditional travel agencies in the near future would disappear. However this viewpoint has been contradicted by some scholars. Again, looking into the aspects, it can be said that the future of traditional travel agencies is dark and this is mainly because of the fact that internet facilitates the travelers to collect the required information and this has eliminated the need of the customers to be present physically in the traditional travel agencies (O’Connor, 2008). So the customers have option of retrieving a wide range of information at a lightning speed without having to leave their home (Lawton and Weaver, 2009). Moreover, it is also opined by Schmidt-Rauch and Schwabe, (2014) that the online environment strives towards offering boarder choices to customers and so it empowers the customers towards making informed purchase decisions. The online platform also provides options for online booking and it is also the fact that the suppliers tend to offer guaranteed low rates and incentives like wireless internet connection to the customers who have made their bookings via company website (Thakran and Verma, 2013). Again, it is mainly because of the increase in the bargaining power of the Online Travel Agents and all these aspects can be considered to be major factors that reduce the competitiveness of the traditional travel agencies (Toh et al., 2011).        

Thus from the above discussions, it can be said that Air New Zealand is mainly involved in scheduled passenger travel services and cargo services. However taking into consideration the passenger services, the airline company possess the options of either distributing its services through traditional distribution channel or adopt the online distribution channel. Again in this context, online distribution channel would be more beneficial over traditional travel agencies since it would facilitate the customers with braid range of information and save time and effort by online booking (Wen, 2009). On the other hand the company would also be beneficial since it would not have to pay incentives or commission to the travel agencies which would result in reduced operational costs.   

[Source: Self]

Air New Zealand would strive towards adopting the distribution strategy where the traditional intermediaries would be present in the disintermediation and reintermediation facilitated by web. The tour operators would be responsible for performing an aggregating function together with converting the travel services into packages.

The above figure provides a clear picture of the distribution strategy of Air New Zealand where on one hand the airline company would strive towards distributing its products and services through its call center and ticket office where the customers can either book their ticket over phone or can also book their ticket by visiting to their ticket office. This strategy would facilitate the company to help those who are not technology friendly and prefer physical presence over virtual presence (Taneja, 2016).  

The company would also have the option of distributing its products and services through its website and this would facilitate in attracting the customers who prefer not to travel to book their tickets and are tech savvy.

On the other hand the company would also emphasize upon developing a global distribution system that would include the traditional travel agencies and their website from where the customers can book their tickets by visiting these traditional agencies and can also collect information either from the office of the travel agencies or from the website of the travel agencies.

The company would also make an effective use of the consolidators to target the group travelers who prefer planned tour packages since it costs them less. So these consolidators facilitate the travelers to offers tour packages that includes hotel booking, flight booking and other services.

Finally the online travel agencies would provide a platform for both the customers and the airline company to interact with each other and also force the airline company to offer their services at lower rates and this is mainly because of the presence of the competitors in the same platform (Christopher, 2006). The online travel agencies would provide an opportunity to Air New Zealand to offer take into consideration the rates offered by the competitors and then plan it rates or keeping the same rate can offer added value to its customers which would prove to be beneficial in gaining market share.

Conclusion

Thus from the above discussions, it can be observed that distribution channels plays a major role in the operation of the business since it is the way in which the products and services that are produced ultimately reaches the final customers. So it becomes important on the part of the producers to plan their distribution strategy in an efficient manner so that right products and services are made available to the right individuals at the right time and at the right price. This is the reason why Air New Zealand emphasizes upon making an effective use of the mix of the traditional and online distribution strategy.

References

airnewzealand.co.nz. (2015). Air New Zealand: A more sustainable airline socially, environmentally and economically. [online] Available at: https://www.airnewzealand.co.nz/assets/PDFs/J004845-Sustainability-Report-2015_FINAL-ART-NEW_MEDRES.pdf [Accessed 5 Oct. 2016].

Airnewzealand.co.nz. (2016). About Air New Zealand | Air New Zealand. [online] Available at: https://www.airnewzealand.co.nz/about-air-new-zealand [Accessed 5 Oct. 2016].

Centreforaviation. (2010). Virgin Blue-Air New Zealand “cooperation”. A game-changer – perhaps | CAPA – Centre for Aviation. [online] Available at: https://centreforaviation.com/analysis/virgin-blue-air-new-zealand-cooperation-a-game-changer—perhaps-25879 [Accessed 5 Oct. 2016].

Christodoulidou, N., Brewer, P. and Connolly, D.J. (2010), “An examination of the transactional relationship between travel intermediaries, travel meta sites, and suppliers”, International Journal of Contemporary Hospitality Management, Vol. 22 No. 7, pp. 1048-1062.

Christopher, M. (2006). The strategy of distribution management. 3rd ed. Westport, Conn.: Quorum Books.

Dabas, S. and Manaktola, K. (2007), “Managing reservations through online distribution channels: an insight into mid-segment hotels in India”, International Journal of Contemporary Hospitality Management, Vol. 19 No. 5, pp. 388-396.

Kaewkitipong, L. (2010), “Disintermediation in the tourism industry: theory vs practice”, in Nelson, M.L. (Ed.), Sustainable e-Business Management, Springer, Berlin, pp. 160-171.

Law, R., Leung, K. and Wong, R. (2004), “The impact of the Internet on travel agencies”, International Journal of Contemporary Hospitality Management, Vol. 16 No. 2, pp. 100-107.

Lawton, L.J. and Weaver, D.B. (2009), “Travel agency threats and opportunities: the perspective of successful owners”, International Journal of Hospitality&Tourism Administration, Vol. 10 No. 1, pp. 68-92.

Marque.co.nz. (2015). Air New Zealand best airline in the world again. [online] Available at: https://marque.co.nz/blog/air-new-zealand-best-airline-world-again [Accessed 5 Oct. 2016].

O’Connor, P. (2008), “Distribution channels and e-commerce”, in Pizam, A. and Oh, H. (Eds), Handbook of Hospitality Marketing Management, Butterworth-Heinemann, Oxford, pp. 186-208.

Schmidt-Rauch, S. and Schwabe, G. (2014), “Designing for mobile value co-creation – the case of travel counseling”, Electronic Markets, Vol. 24 No. 1, pp. 5-17.

Taneja, N. (2016). Airline Industry. Taylor and Francis.

Thakran, K. and Verma, R. (2013), “The emergence of hybrid online, distribution channels in travel, tourism and hospitality”, Cornell Hospitality Quarterly, Vol. 54 No. 3, pp. 240-247.

Toh, R.S., DeKay, C.F. and Raven, P. (2011a), “Travel planning: searching for and booking hotels on the Internet”, Cornell Hospitality Quarterly, Vol. 52 No. 4, pp. 388-398.

Wen, I. (2009), “Factors affecting the online travel buying decision: a review”, International Journal of Contemporary Hospitality Management, Vol. 21 No. 6, pp. 752-765.