Air New Zealand Limited (airline code TE, ASX code AIZ) is New Zealand's premier domestic and international airline. It is one of those airlines that has to contend with great distances, an oil-importing home economy and a limited domestic market, but the airline has managed to survive and thrive for over sixty years.

Early Days

The airline was formed in Wellington in 1940 as a limited liability company, registered as TEAL (Tasman Empire Airways Limited). The shareholders included the New Zealand government, Qantas and BOAC. With three S.30 flying boats TEAL served a variety of towns in New Zealand, Sydney (weekly) and throughout World War II was chartered to a number of Pacific destinations. After the war the airline would open new engineering workshops, and extend flights to Fiji, the Cook Islands, Norfolk Island, Samoa, Tonga and in the 1950s, Tahiti, Guam, Tokyo, Melbourne, Cairns and Brisbane. The airline also took possession of DC-6, Electra, Viscount and Fokker aircraft.

Into the Jet Age

By 1954 only the governments of New Zealand and Australia owned shares in TEAL. The New Zealand government ended up taking Australia's stake, in exchange for bilateral air rights and NZD$1,622,800, making it a solely government-owned company. In 1965 TEAL was renamed Air New Zealand. The airline upgraded to DC-8s for use on its trans-Tasman routes. New services were launched to Noumea (1964), Los Angeles via Nadi and Honolulu (1965), Singapore (1966) and Hong Kong (1966). In the 1960s the airline shifted its resources and flights from Wellington to the country's largest city, Auckland. Air New Zealand began purchasing a myriad of different aircraft, including Boeing 737s in 1968, and in DC-10s in 1970, and became a shareholder in a number of small Pacific airlines and hotels.

From 1973, Air New Zealand started using its new branding - two tones of blue and the Koru symbol on the tail of its aircraft. The new DC-10s had only just been painted with the airline's new livery, when the oil shocks hit the world in 1973. The airline however would still use the wide body aircraft on its Australian, Asian and American routes, while shorter island hopping services (the 'coral route') throughout the Pacific would use DC-8s. The airline merged with a domestic carrier (New Zealand National Airways Carrier in 1978, reducing duplication in 1978.

The decade ended on a tragic note when one of its DC-10s crashed into Mount Erebus in Antarctica on November 28, 1979 while on a sightseeing flight. 257 passengers and crew died. A Royal Commission would later blame administrative functions within the airline's flight operations division, however an appeal would later determine that the Commission exceeded its terms of reference and denied natural justice in assessing if airline employees had engaged in misconduct.

World Airline

In 1981 the airline started flying Boeing 747s and later 767s on its major trans-Pacific, trans-Tasman and Asian routes, while retiring DC-8s and other older aircraft. The 1980s saw an expansion in the network: after wet-leasing a DC-10 to British Airways, finally Air New Zealand commenced flights to London via Papeete and Los Angeles in 1982. Other new routes joined up Tokyo (1981, after a 25 year break), Perth (1982), Port Moresby (1982), Hobart (1983), Vancouver (1985), Dallas (1987, which it would promptly drop), Frankfurt (1987) and Cairns (1988).

On December 20, 1988 the government's entire stake in Air New Zealand was sold to a consortium led by Brierley Investments Ltd. Qantas, American Airlines, Japan Airlines become major investors, but special laws ensure that majority ownership is held by New Zealanders, including the staff, public, institutional investors and the government. With shareholder values on mind, the airline's strategy begins to focus on offshore sales, such as traffic between Australia North America (and Asia, after negotiating special fifth freedom traffic rights), given New Zealand's small market and Air New Zealand's failure to obtain rights to fly domestically in Australia. In 1991, Air New Zealand would float on the New Zealand stock exchange, and would by 1991-92 move from a period of losses in the late 1970s to delivering a NZD$115 million profit to its shareholders.

As Asian economies boomed in the 1990s, Air New Zealand began flying to Kuala Lumpur (1990), Bali (1990), Bangkok (1990), Nagoya (1991), Taipei (1991), Seoul (1993), Osaka (1994) and Fukuota ((1995). The airline also explored services to emerging South America with a cooperative agreement with Lan Chile. Commercial imperatives would make the airline go into strategic partnerships with other airlines: several trans-Tasman flights are code-shared with Qantas, of which may feed into services to the United States (after the Asian economic crisis of 1997, it dropped several routes in preference for code shares). Air New Zealand would take the initiative to fly directly from the United States to Australia.

Disaster Averted

But there was one commercial idea that was almost fatal for the airline. In 1996 it acquired 50% of fellow Star Alliance founder Ansett Australia, a much larger airline with a plethora of management problems (but with some nice new aircraft and cash reserves Air New Zealand would find useful for its own 'core business'). Maintenance on Ansett Australia aircraft is found to be so poor that air safety regulators in Australia ground six of its 767s around Christmas 2000, stranding Mardy and several hundred passengers all over Australia. Ansett would be grounded again a few months later when cracks are discovered in its 767 fleet. As the Ansett Group, bleeding NZD$1.3 million a day, threatens Air New Zealand's viability, the board tries to get the New Zealand government's approval for more foreign investors, ideally Qantas, although Singapore Airlines with a 25% stake wants more. A few adverse financial reports later would turn around investor confidence, until Air New Zealand ends up asking arch-rival Qantas to come in.

The following day was September 11, 2001. All of a sudden nobody, including the Australian government, wanted to invest in an airline.

On September 14, 2001 Ansett Australia is placed in voluntary administration, costing Air New Zealand a loss of NZD$1.425 billion. To stop Air New Zealand going under the New Zealand government injects $885 million through loans and equity investment. A series of stringent economy measures and novel marketing techniques takes place, including the relocation of international call centres to New Zealand, the withdrawal of BAe 146 jets, reductions to the number of board members and their salaries, single class cabins, no meals on "Express Class" domestic flights and the introduction of internet ticketing.

Air New Zealand managed to survive, even with additional crises emerging including SARS and the Second Gulf War. In 2002-03 it managed to secure a $220 million profit before tax. It is perhaps ironic that the symbol of the airline, the Koru (a highly stylised representation of a fern fround unfolding), which were originally painted on the prows of Polynesian ocean-faring canoes, symbolises new life, growth and renewal.

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