From ruin to rebirth - what a difference two years makes

By CHRIS DANIELS

From staring into the abyss, to new planes and a dividend payout - the Air New Zealand of September 2004 is a vastly different company from the one that feared annihilation by Qantas just two years ago.

The aggressive expansion of Virgin Blue in Australia (which was part of the reason Air NZ's Ansett subsidiary collapsed) has not happened here in New Zealand.

World airlines have even used Air New Zealand as a case study in how to successfully adopt some of the cost-cutting spirit of a Virgin Blue, without losing the attraction of a full-service airline.

This was the idea behind Air New Zealand Express, where air fares were slashed, frequencies increased and bookings shifted to the internet. Business class and hot meals were also scrapped, leading to big savings for the airline.

The model was adapted to the Tasman and Pacific Island routes, where competition has become fierce since Emirates and Virgin offshoot Pacific Blue started services.

But Air New Zealand and Qantas still make up the bulk of the Tasman market, measured by seat numbers or flight frequency. They are the only airlines flying nonstop between North America and New Zealand.

Air NZ will soon spend about $1.4 billion on a fleet of new long-haul aircraft from Boeing, while also embarking on a $20 million per plane upgrade of its eight 747 jumbo jets.

As tourism continues to boom, the airline has stabilised, then prospered, and has cash reserves of $1 billion. But chief executive Ralph Norris often warns that aviation is a risky business, with wars, fuel prices and terrorism able to put a quick dent in that bank balance.