How the Recession Affected Air New Zealand

Recession defined by Investopedia (2010) is ‘a significant decline in activity across the economy, lasting longer than a few months.’ With the fall of the US banking system in late 2007 came the recession which lasted all until the present day; we are now currently steadily recovering. But during the recession many countries suffered as did New Zealand, out of the companies that were affected, among them was Air New Zealand one of New Zealand’s biggest companies. The impacts of inflation causing raised CPI, the rise and fall of supply and demand, and unemployment are just some of the causes from recession. These impacts have a huge shock on the society, such as the effects on the general people.

Air New Zealand Ltd (2010) is an Auckland based, New Zealand owned airline which was originally incorporated in 1940 as Tasman Empire Airways Ltd (TEAL), then in 1965 the New Zealand government took ownership and thus renaming it to Air New Zealand. The airline was then largely privatised in 1989 until in 2001 it returned to a majority government ownership after a failed attempt at a merger with Ansett Australia. In 1999 Air New Zealand successfully became a member of the Star Alliance global airline alliance.

Gans, J., King, S., Stonecash, R., Mankiw, G., (2008) explains that the consumer price index (CPI) is the measure of the overall price of goods and services purchased by consumers from one year to the next, so as the CPI rises so does the expenditure of a household. In recent studies by Statistics NZ (n.d) it describes the steadily rising CPI since 2007 from just over 3,500,000 to a little over 3,800,000 present day. It also shows that the number of domestic flights have fallen from just over 3,750,000 in 2007 to around 3,300,000 present day with a slight rise of around 275,000 between 2008 and 2009, while international flights have been steady with 1,250,000 in 2007 until present day with a drop of nearly 500,000 during late 2008 and early 2009 but is now