Air New Zealand Limited is the national airline of New Zealand. Based in Auckland, the airline operates

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Air New Zealand Limited is the national airline of New Zealand. Based in Auckland, the airline operates scheduled passenger flights to 22 domestic and 29 international destinations in 16 countries around the Pacific rim and the United Kingdom.

The following are excerpts from recent newspaper articles illustrating the increasing competitive pressures in the airline industry.(On the attached sheet you will find excerpts from recent newspaper articles highlighting the turbulent competitive environment currently faced by Air New Zealand. Assume you have been appointed as the senior management accountant of Air New Zealand.)

THE PRESS — 27 JAN 2016 Edition 1, Page 2

Air NZ signals big fall in airfares

By: VERNON SMALL

Air New Zealand is signalling big drops in domestic and international airfares driven by lower fuel prices and greater seat numbers. Chief executive Christopher Luxon told a parliamentary select committee on Tuesday that there was downward pressure on prices because of falling fuel costs, which made up between 15 and 20 per cent of the airline's outgoings, and prices would fall substantially. He said Air NZ had increased its capacity by 12 per cent but it was selling into economies that were growing by 2 to 3 per cent so it needed to work to sell those seats.

Luxon told reporters he could not say how much prices would drop by, because there were many variables including fuel costs. "We've got more supply probably than demand and we need to fill those seats and the way we do that is to lower the prices to recover the marginal costs of flying those aircraft." The third factor was that with falling fuel prices there was more competition coming into the market. That could be seen in the Jetstar-Qantas group operating in New Zealand and the resurgence of smaller regional players. He said that would lower domestic and international seat prices. "It's happening across the board. Because clearly when you fly internationally fuel becomes a bigger variable than it does within domestic New Zealand." Luxon said there would be heavy discounting while Air NZ tried to fill its extra capacity and meet competition, but there would also be a fall in baseline seat prices. But he said fuel prices were volatile. Air NZ hedged about six months ahead but was now accessing fuel at about market prices.

New Zealand Herald — A003 — 27 Jan 2016

Air NZ says cheaper fares on way

Prediction comes as Jetstar starts new domestic routes and Qatar joins a growing list of rivals in the region

Nicholas Jones politicsnicholas.jones@nzherald.co.nz

Kiwis will soon enjoy substantially cheaper airfares, Air New Zealand says, just days before Jetstar takes off on several new domestic routes. The new flights come as Qatar Airways confirms plans to fly here -- the latest in a growing list of new flights announced in the past six months as low fuel prices combine with strong global demand for travel. And Jetstar yesterday responded to comments from Air New Zealand chief executive Christopher Luxon that its pricing on new regional routes was unsustainable by promising it was "in it for the long term" -- and would beat any lower fare by 10 per cent. Increased rivalry was one reason both domestic and international fares would drop, Mr Luxon said. The other factors were lower fuel costs and the fact his airline had expanded at its fastest rate yet and had 12 per cent more seats to sell. Although he said prices were likely to drop substantially, Mr Luxon said he was unable to put a figure on how much airfares could fall. "When you fly internationally fuel becomes a bigger variable than [on domestic flights] ... When you fly for 12 to 14 hours, fuel can be 25 to 30 per cent of your actual cost base." Mr Luxon spoke after appearing before Parliament's finance and expenditure committee. Mr Luxon said Air NZ had valued such communities by running services that connected them. Jetstar had "cherry-picked" the most profitable centres to add routes to, while Air NZ serviced 22 centres across New Zealand. Flights on 15 routes had lost a total of $1 million a month for three years. Mr Luxon said Jetstar's low fares could not last, and on some routes its promotional pricing meant it was losing a "truckload" of money. A Jetstar spokesman told the Herald it was "in it for the long term". Qatar Airways, AirAsia X, Sichuan Airlines, American Airlines and United Airlines are all either flying or said to be planning NZ routes. Air NZ started flying to Buenos Aires and Houston last month and begins seasonal flights to Vietnam in June.

THE MARLBOROUGH EXPRESS — 15 JUL 2015 Edition 1, Page 9

Lower trans-Pacific airfares side-effect as koru and maple face off

Travellers can expect cheaper airfares to the United States and Canada as Air New Zealand faces increased trans-Pacific competition. Air Canada has announced a new non-stop service from Vancouver to Brisbane, a move which will put a dent in Air New Zealand's Auckland to Vancouver service, one analyst says. Air Canada chief executive Calin Rovinescu said flights to Brisbane would initially operate three times weekly using Boeing 787-8s beginning June 17, 2016, with the intention to increase to a daily service. Air New Zealand, a Star Alliance partner with Air Canada, flies non-stop from Auckland to Vancouver five times a week using Boeing 777s. CAPA Centre for Aviation analyst Blake Moore said Air Canada's new service would hurt Air New Zealand.

THE DOMINION POST — 12 NOV 2015 Edition 1, Page 4

'Friendly competition' sparks lower US airfare

By: JOHN ANTHONY

AMERICAN AIRLINES' planned daily service between Auckland and Los Angeles is already benefiting consumers after Air New Zealand responded by promoting a $499 one-way fare on the route, American Airlines has suggested. American Airlines chief executive Doug Parker announced it would launch a daily non-stop service between Auckland and Los Angeles from June, in conjunction with joint venture partner Qantas. Parker said American Airlines and Qantas had yet to work out prices, but said consumers would benefit from the "friendly competition" with Air New Zealand, which had held a monopoly on the route since 2012. Air New Zealand responded to the move by its rivals by promoting a $499 one-way and $973 return fare between Auckland and Los Angeles on its Grabaseat website, for flights between early May and late August. Flight Centre New Zealand general manager Sean Berenson said increased competition often resulted in carriers responding with lower fares.

Required:

What management accounting tools and techniques may support the operational and strategic management functions of Air New Zealand? In your answer, also explain clearly how these tools and techniques may be applied to manage and control costs.