KEY POINTS:
Setting up a business in China is not for the faint-hearted. Air New Zealand had people on the ground in Shanghai six years before its first plane landed, yet the multi-million dollar investment has been highly successful.
The numbers tell it all. China is New Zealand's fourth-largest source of international visitor numbers with more than 124,000 Chinese residents visiting the country in the March 2008 year.
They are not big spenders but the numbers are increasing as business, family and educational links between the two countries grow. Visitor numbers are expected to more than double in the next five years.
The New Zealand-China Free Trade Agreement is simply icing on an increasingly rich cake.
China is a bright spot for Air New Zealand in an increasingly gloomy international aviation market. The airline launched a direct, three-times-a-week service from Auckland to Shanghai in November 2006 and was says Air New Zealand chief executive Rob Fyfe, "enormously successful".
"We had to think about cargo and freezer flows as well as tourist flows," recalls Ed Sims, Air New Zealand group general manager international.
"We felt we could fill the belly-space doing Shanghai on a regular basis and that has proved to be the case.
"We have seen Qantas out of Australia in a third attempt to get a Shanghai service up and running."
It was the success of the service to Shanghai, China's commercial hub, that persuaded the airline to negotiate to fly direct to the Chinese capital. Its twice-weekly service between Beijing and Auckland starts in mid-July and will use the airline's new Boeing 777-200ER aircraft. The service will expand to three times a week from November.
The timing could not be better for Air New Zealand, coming on the heels of the signing of the FTA and with the Olympics in sight. The service will operate at the new dragon-shaped Terminal 3 of Beijing Capital International Airport alongside other Star Alliance members.
Sims admits that negotiating with China over landing rights was challenging.
"One of the first lessons we learned was the importance of reciprocity. If we were supportive of China, we found China was supportive of New Zealand."
This was especially the case over the issue of business visas. In theory, at least, Chinese businesspeople coming to New Zealand can obtain a visa within a week and New Zealand businesspeople going to China in a similar period. At busy times, however, there can be delays.
Since 9/11, however, Chinese visa requirements and delivery times have probably been better than those in the United States. China has agreed to expedite visa applications for New Zealand businesspeople. In agreed sectors the visa term is six months.
In any case, China is not a market you visit on a whim. The amount of preparation for business meetings and negotiations is huge and impromptu visits rarely pay dividends.
Sims says the essence to doing business in China is understanding the business culture.
"We can't become Chinese, nor do they want us to become Chinese. They key issue is not applying the Kiwi negotiating style but using the 'lesson of the lantern bearer'."
In short, he says, for Air New Zealand this meant not bringing out its big guns at once and using the company's standard-bearer, chief executive Rob Fyfe, on the important occasions only.
"No matter how I negotiated, I was not going to be given the deal," says Sims.
"It was going to be Rob Fyfe. The Kiwi style is to bring in the top brass early on. The Chinese style is not to."
Air New Zealand would like to have more flights to China and, over time, negotiate services to other cities like Guangzhou because of the market's growth potential.
"We see a situation by 2015 where it could become the second-largest market - even ahead of the United Kingdom," says Sims.
A case study by New Zealand Trade & Enterprise reveals that Sims used a a guerrilla marketing campaign to increase penetration into the Chinese market. Conventional state-run television channels tend to tightly control commercial messages and media costs are also high.
Air New Zealand targeted its campaign to China's new breed of middle class known as the Tiao bourgeoise (or little bourgeoise). They are products of the Mao era who have had a lot of money spent on them and have quite lavish budgets.
Air New Zealand brought iconic Chinese figures - like film stars and hip-hop musicians and artists - to New Zealand so they could record their experiences on their celebrity blogs. This strategy enabled the airline to increase its reach to a young and highly affluent middle class they could not otherwise have reached through Western-style news media.
Air New Zealand has a dedicated website, ExperienceSomethingNew.com, to attract young Chinese travellers.
The airline is also using mobile phones as a marketing channel. With mobile ownership in Shanghai higher than New Zealand levels, it has found it an ideal way to connect with the young middle class. Sims has also run a text campaign as an extension of the celebrity blog, noting that North Asian customers are tending to blur the distinctions between online blogging and what they use their mobile phones for.
The upshot is that using up-to-date technologies is enabling the airline to establish one-on-one relationships with potential customers by contrasting the escapism and the natural New Zealand landscape with life in a busy metropolis like Shanghai.
IN FLIGHT
* Air New Zealand operates three direct flight services between Shanghai and Auckland.
* In July Air New Zealand will start a direct service between Beijing and Auckland twice a week using Air New Zealand's new Boeing 777-200ER aircraft and will add an additional service in November.
* In Hong Kong, Air New Zealand operates nine services to Auckland and seven services to London per week.
