Forum Archive Index - November 2001

[Greg <g&jelliott@xtra.co.nz>]

whoa...sounds like you guys have been reading Michael Porter. Management
theorists sometimes use his 'five forces analysis' to examine the levels of
competition in an industry. An example for airlines is attached. Phil's
right - barriers to entry are high. Competition is largely determined by
brand strength and ability to control costs - especially the latter. I don't
know that Air NZ did much detailed analysis before buying Ansett - think
not.

Regards, Greg E.

> From: "Phil Boeyen" <pboeyen@sharechat.co.nz>
> Reply-To: sharechat@sharechat.co.nz
> Date: Wed, 28 Nov 2001 21:07:47 +1300
> To: <sharechat@sharechat.co.nz>
> Subject: Re: Re: [sharechat] Cullen airlines
> 
> Hugh
> 
> Good precis. Cullen does seem to have done an about turn on this.  One
> moment "let's stay in till we get it up and going and make a buck", then the
> next "we're long term shareholders".
> 
> One thing though.  I know you have talked before about airlines being a
> commodity biz re Buffet, but really, are they low/no entry? Given the safety
> regulations and landing right issues that have to be met, I wonder.  Also, I
> have my doubts that competition is determined by price alone.  Certainly
> discount carriers yes, but as so many airlines make their main cash from
> business travellers, I would have thought things like take-off slots,
> branding, in-flight services and so on count for quite a lot.
> 
> Regards, Phil
> 
> 
> ----- Original Message -----
> From: "hugh webber" <hugh.webber@clear.net.nz>
> To: <sharechat@sharechat.co.nz>
> Sent: Wednesday, November 28, 2001 6:17 PM
> Subject: Re: Re: [sharechat] Cullen airlines
> 
> 
>> yeah, I'm rather sceptical of the Cullen logic on this....so we the
> taxpayers
>> will have the privilege of paying for future losses without any profit
> motive
>> to stimulate cost efficiencies.
>> But then there are lots of contradictions involved.
>> It was said that the Govt could not afford to let Air NZ disappear becos
> of
>> the effect on tourism and exports which is probably a reasonable
> statement.
>> So now they close down airfreight exports from the South Island and
> cripple
>> the world beating Air NZ Engineering Workshops in Chch.
>> 
>> And as we all know the history is fraught with contradictions. Air NZ
> wanted
>> Ansett and said it had identified $350 million of synergy savings incl
>> doing Ansett engineering work in Chch. Nothing happened. No savings
>> took place. Instead costs blew out as they took on Toomey and his
>> gold plated mates from Qantas - was it $25 million on management that
> wasn't needed.
>> Then the Aust government says you can have Ansett and now we'll let in
>> Impulse and Virgin Blue so no one can make a profit.
>> So Ansett goes down the tube and the Oz govt says its all Air NZ's fault.
>> Nothing as blind as those who will not see.
>> 
>> And as I've pointed out from time to time airlines are a commodity in the
> Buffett
>> analysis i.e. you can't make a reasonable continuing profit - they are
> typified
>> by low/no barriers to entry and competition determined by price alone -
>> so sensible people (which should include governments) don't invest in
> them.
>> 
>> cheers,
>> Hugh
>> 
>> ----------
>> From: G Stolwyk <stolwyk@wave.co.nz>
>> To: sharechat.co.nz <sharechat@sharechat.co.nz>
>> Subject: Re: Re: [sharechat] Cullen airlines
>> Date: Wednesday, 28 November 2001 12:48
>> 
>> Big ' Iron bird ' with wings clipped, can't fly so high anymore!
>> 
>> One would normally smell kerosine,  whenever this plane takes off from the
> tarmac; from now on, the
>> odour of the gases from the exhausts will be more  like that of  burnt
> bank notes!
>> 
>> Keep flying Big Iron Bird!
>> 
>> Gerry
>> 
>> 
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Airlines - Porter's Analysis

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