Speeds high
23rd Nov 2006, 06:15
Whats the guts, and what does it mean for this apparently shrinking airline?
slamer.
23rd Nov 2006, 16:30
Air NZ slashes capacity on Tasman route
Friday November 24, 2006
By Liam Dann
Air New Zealand has made good on threats to cut transtasman capacity in the wake of a failed code-share proposal with Qantas.
And chief executive Rob Fyfe yesterday said more radical changes to the route were being considered.
Just a week after it was forced to give up on the proposal to share flights across the Ditch with Qantas, Air NZ has announced plans to cut 11 per cent of the seats to Australia out of Auckland and 15 per cent of those out of Wellington
Fyfe described the cuts - which relate only to the April-to-October off-peak season - as "reasonably significant" but conservative.
While the timing reflected the need to get timetables in place for travel agents, "without doubt this is more than we would have done if the code share had got up", he said.
The code-share proposal was knocked back in a draft decision by the Australian Competition and Consumer Commission (ACCC) on November 3. That prompted Qantas and Air NZ to last week scrap all plans to work together.
Wellington Airport - a vocal opponent of the code-share agreement - has borne the brunt of the cuts.
It will result in Sydney flights being cut from 12 to 10 per week, Melbourne flights from seven to five and Brisbane from seven to six. Auckland will not lose any flights but the increased use of smaller A320 planes will cut capacity.
Christchurch loses one Sydney flight and one Freedom Air flight to the Gold Coast. Dunedin loses one Freedom flight to Sydney and one to the Gold Coast. Palmerston North also loses one Freedom flight to Brisbane.
But Fyfe said a far more significant review of the Tasman service was underway and would be completed in February or March.
It would look at the fundamentals of how Air NZ continued to compete on the Tasman route and ask, "Is there a totally different model we need to use here to make this market more profitable."
The changes would only lift load factor during the April to October period from 63 per cent to about 70 per cent, Fyfe said.
That was still well below market norm and competition for passengers would still be fierce, he said.
Wellington Airport was not surprised by the changes, a spokesperson said last night. "It's a schedule for one season and it's not unusual for an airline to make seasonal changes in their schedule."
Auckland Airport declined to comment last night.
Fyfe said the key concern for Air NZ was ensuring the changes did not impact on the high-value business market.
For example, one of the Wellington-to-Sydney services that had been removed was an early morning flight on a Sunday.
"That is not that well supported; it doesn't affect the business market," he said.
The airline had been careful to ensure that Wellington business travellers could still get to Sydney and back on a day trip.
In the past week Air NZ's competitors such as Pacific Blue have down played the likelihood of stepping in to fill capacity holes left by the airline.
Industry experts have suggested that Qantas may look to significantly reduce its full-service flights across the Tasman and replace them with flights by its low-cost carrier Jet Star.
The market view is that Emirates is unlikely to increase its capacity on the route in the near future.
Air NZ shares closed unchanged at $1.55 yesterday. The stock has had a strong run in the past few weeks on the back of falling fuel prices and is now trading at the highest price of the year. They jumped 7c on Wednesday.
Tasman seat reductions
Auckland: 11 per cent
Wellington: 15 per cent
Palmerston North: 15 per cent
Christchurch: 7 per cent
Dunedin: 28 per cent
Cuts relate to the April-to-October off-peak season