AirNZ: considering low-cost option
WELLINGTON (Dow Jones)--Air New Zealand is mulling introducing more cut-price services to help it return to profitability, its chief executive Ralph Norris told National Radio on Friday. . .. .But even the suggestion the airline might adopt a low cost business model has provoked opposition from trade unions who fear the Air New Zealand brand will lose its value. . .. .Norris said Air New Zealand has to make sure it doesn't end up in a situation like its collapsed Australian airline Ansett, which was locked into a high cost structure. . .. ."We have been considering a range of options and certainly the low cost option is one that has been under consideration. . .. ."This is not an easy decision to make. There's a lot of complexity and no decision has been made. . .. ."In regard to the strategy going forward, we are very much building the airline, not destroying it," he said. . .. .The airline, dismissed as small and weak by Standard & Poor's Corp. in a recent report, is 82%-government owned after being rescued earlier this year with a NZ$885 million bailout. . .. .The company is facing strong competition in its domestic market from Qantas Airways, and following the collapse of Ansett, lacks a partner in the Australia domestic market to feed travelers into its trans-Tasman and international routes. . .. .Air New Zealand and discount Australian carrier Virgin Blue are in talks to establish a partnership. . .. .Norris said the company doesn't want to give away its strategy to competitors but wouldn't rule out integrating its existing discount carrier, Freedom Air, with the parent's operations. . .. ."Ansett was not able to move very quickly because of its union arrangements, etcetera, that saw it unable to move its cost base down fast enough to compete in a very competitive environment. . .. ."We have to make sure that Air New Zealand going forward has the flexibility to enable it to respond to competition because as we saw with Ansett, an airline can unravel very quickly," he said. . .. .Norris indicated that another option under consideration is running its domestic operations on a discount basis while maintaining a full service international airline. . .. .Demand for air travel is beginning to recover from the slump induced by the Sept. 11 terrorist attacks, Norris said, but at the same time capacity will also grow. . .. ."The recovery will be quicker than anybody anticipated but there is this issue that a lot more capacity is suddenly coming back into the market place and putting more pressure on fare levels," he said.