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s p e c i a l r e p o r tThe two airlines each have a strongengineering product line with surprisinglylittle duplication.Ansett works on Boeing B737-300s, B767sand Airbus A320s in Melbourne. In Auckland,Air NZ has Boeing B747 and B767 lines. Underthe plan, all heavy D-checks on B767s willbe moved across the Tasman to Auckland,although lighter checks will continue in Australia.New B737s being purchased by Air NZwill be supported in Melbourne.Similarly, engines and components will besupported substantially at their current locations;the CFM56 in Melbourne, the CF6-80C2at Auckland and the JD8 in Christchurch.“It all fits together very well,” commentedMr Vincent. “Even if you look in the componentarea we have highly specialised capabilityhere in Melbourne around hydraulics, mainlybecause of the A320, which has sophisticatedelectro-hydraulics systems.“Similarly we have a lot of avionicscapability, mainly driven by A320 technology.If you look at Air NZ, they have a lot ofcapability in pneumatic systems which wedon’t have.“There will be some work that’s taken outof one location and put into another, but thecommitment we have given to our people isthat for each parcel of work that’s moved oneway there will be a parcel of work of roughlyequivalent size moved the other way.”ANNZES aims to create Centres of Excellenceaimed at doubling the volume in eachgeographical location, driving efficiency andmaking pricing more competitive.Mr Vincent said customers’ priorities arequality, price and turn time. Quality is numberone. Price and turn time are equal second.“In the areas of engines and componentswe believe we are already world class orapproaching world class on quality and price.We recognise we must improve our turn timesand we have a significant programme in placethat will achieve this end.“At Ansett we achieve our current turntimes in most cases with only one shift; a fiveday,Monday to Friday day time shift.“We know we can drive our turn timedown hugely when we put on additionalshifts – afternoon shifts and seven-day-aweekshifts. The business plan provides forthis move forward.”Where is ANNZES right now? The managementteam will be in place by February,co-ordinating activities on either side of theTasman. There will be a progressive roll-outof production units over the next 12 to 18months, beginning with materials management,then components, engines, airframesand support areas such as technical servicesand quality assurance.The two airlines rejected a ‘Big Bang’approach – a virtual overnight merger – mostlybecause of concerns amongst workers aboutleaving the employment of establishedcarriers many had worked with for years.According to Mr Vincent, the transfer ofthe workforce to the ANNZES payroll couldtake two or three years.“We decided that doesn’t have to happenon day one. There is no reason why we can’tput the management team in place and leavethe employees where they are and, over aperiod of time, demonstrate that we can makea success of the business.“One of the challenges we are going tohave is to convince people that working fora successful aircraft engineering business isANNZES chief operating officer,John Vincent: third party contractscrucial to future successbetter than working for a successful airline.That’s not going to be easy.”Mr Vincent stressed the joint venturedid not emerge as a result of the twoairlines joining the Star Alliance last year, butwas more about global trends in the MRObusiness.“We recognised the world of MRO israpidly becoming global... by putting thetwo organisations together we becomea significant player in this region. That isnecessary because if we don’t, whether itsLufthansa or GE or Pratt & Whitney or Boeing,then we are going to wake up one day andfind these big players are well and trulyestablished in our backyard.“The objective of us joining forces is tocreate an organisation which has a significantcritical mass in the region.”ANNZES does not fear competition withthe big guns. The airlines’ recognition in thethird-party MRO market is quite strong. MrVincent said Ansett carries out a reasonableamount of engine work in Asia and points toAir NZ engineering as proof of the pudding.“They have been able to go into the veryhighly competitive JD8 market in the U.S.,right into the heartland of competition. Theysource engines from all over the U.S. They getJD8s from everywhere, including Europe andSouth America.”Mr Vincent does not view location as ahuge competitive disadvantage. “There isno doubt it is an issue. It may be for Europe,particularly with airframes, although I thinkwe are close enough to Asia to be able tobring airframes down here and still be competitive.“But we don’t think it is a real issue whenit comes to components and engines. Allowingfor the relative cost of shipping a component,even an engine which is physically muchbigger, when compared with the value, webelieve in terms of price and turn time we canjustify work being delivered here.“Once you have the volume and demonstrateto people you are viable, havegood quality and are reliable, then you cannegotiate some good shipping deals. Youcan reach the point where the cost of shippingthe engine there and back is reasonablyattractive in the context of total cost to thesupplier,” he said.ANNZES will not be restricting its salesdrive purely to airline work. It will be lookingfor as many opportunities as possible. Air NZ,for example, overhauls industrial jet enginesused in such facilities as pumping stations.What has not been decided to date ishow to brand the company. While ANNZESis the shorthand name for the merged entity,a logo will have to be chosen as a banner forthe company’s wares.“We are being very cautious in lookingat how best to use the recognised brands ofthe two airlines so people know they not onlysending work to a high quality engineeringcompany, but also to a company with rootsin two airlines which understands an airline’sneeds.“As an airline we know that if yourmaintenance providers do not have an airlinebackground they do not really understandwhat drives you, what frustrates you andwhat makes you tick,” said Mr Vincent.As it sets out to lift its presence on theglobal MRO front, ANNZES wants everyoneto know its airline roots.64 | Orient Aviation | February 2000