Case Study: Kiwi International Airline
Case Objectives and Use
At a broad level the case illustrates the difficulties faced by a small competitor trying to compete against much larger incumbents. The case can, therefore, be used in an entrepreneurship to illustrate the basic resource difficulties of small entrants in a business failure. The purpose is intended to get students thinking about the interplay between competitors in an industry. In particular, the case focuses on the need for companies to assess likely competitor responses to actions they wish to take. The key point that this case can help students see is that some actions are more likely to provoke competitor response than others.
Synopsis
Kiwi International Airlines began operating in 1994 under the stewardship of founder, Ewan Wilson. By 1995 Kiwi Airlines was operating regular international flights between New Zealand and Australia, competing with the two major carriers Air New Zealand and Qantas. Initially, Kiwi offered a premium service, but quickly changed to a 'nuts and cola' budget service on flights at very low prices. Kiwi began by operating out of only Hamilton and Dunedin - cities which did not have international services previously. After initial successes with the low-priced approach, Kiwi expanded both the number of cities served and the number of flights offered. The expansion put increased strain on Kiwi both financially and operationally. Qantas and Air New Zealand also responded aggressively. The combination of bad luck with the competitive, financial and operational problems fuelled Kiwi Airlines collapse into bankruptcy within months of expansion.
Case Questions
Q1. Why was Kiwi Airlines so successful initially?
Q2. What went wrong - why did Kiwi Airlines go out of business so fast?
Q3. So why did Kiwi Airlines fail - why did Qantas and Air New Zealand respond?