Air NZ Tries Codeshares on Pacific Services
By Steve Creedy, The Australian | Oct. 27, 2006
Air New Zealand will replace some of its Pacific services with codeshare deals as it continues to seek cost reductions through job cuts and route rationalisation.
The move is part of strategy aimed at boosting revenue or lowering costs on marginal or unprofitable routes.
The strategy includes a proposal to join forces with Qantas across the Tasman in attempt to stop the competitive bloodbath on the route. An Australian Competition and Consumer Commission draft ruling on the proposal is expected within a week.
The latest cuts affect flights linking the Cook Islands, Tahiti and Los Angeles."We cannot justify retaining our current level of service," said Norm Thompson, general manager of short-haul airlines. "The high costs and low yields make this route unsustainable."
The airline's Rarotonga-Papeete-Los Angeles thrice-weekly service will be replaced by a codeshare with Air Tahiti Nui, the national carrier of French Polynesia, but a weekly service between the Cook Islands and Los Angeles will be reinstated.
A four times weekly non-stop service between Auckland and Tahiti will be provided jointly by Air New Zealand and Air Tahiti Nui.
The Kiwi carrier is also seeking approval to codeshare with Fiji's Air Pacific. A daily service operated by Air NZ and Air Pacific between Fiji and Los Angeles would link with the New Zealand airline's London service.
Air NZ chief executive Rob Fyfe said the Air Pacific deal would increase northern hemisphere tourism flows into the Pacific.
"I am very excited about the potential of these arrangements," Mr Fyfe told the airline's annual meeting this week.
"They offer Air New Zealand customers a significantly enhanced schedule, and provide material financial gains by ensuring a far more effective use of the company's aircraft assets and capital resources.
"Air New Zealand predominantly flies long, skinny routes and we must continue to look for innovative network solutions to maximise the breadth and depth of our schedule."
Air NZ's full-year profit before abnormals and tax fell 36 per cent last year to $NZ150 million.
Chairman John Palmer told the annual meeting that recent falls in fuel prices meant this year's pre-tax result would exceed that figure, providing current trading conditions persisted.
But both Mr Palmer and Mr Fyfe emphasised the need to make the airline internationally competitive.
The airline is currently at war with its unions over plans to contract out the jobs of almost 1700 check-in and ground staff to specialist international company Swissport.
The carrier says it needs dramatic improvements after the loss of services work from several airlines, including Singapore Airlines, Jetstar and Qantas New Zealand subsidiary Jetconnect.
It is going through a formal 58-day consultation period with unions, which say the move will cut average remuneration by $NZ15,000.
The unions argue the contract losses are more than offset by increasing passenger numbers at the airline.
Mr Fyfe told the annual meeting that Air NZ's Airport Services division was in crisis.
He said 45 per cent of its revenue came from third-party airlines. It had lost two significant customers in 12 months while a third had terminated its contract.
"A recent benchmarking exercise has highlighted that our competitors for this business have more flexible employment agreements and are able to undercut our costs by as much as 20 per cent," he said.
"If we don't rapidly address our lack of competitiveness, we will not only lose our third-party airline customers but we will place Air New Zealand at a disadvantage to our key competitors."
Mr Fyfe said he had a "strong preference for a competitive in-house solution" but warned that airport services companies had already indicated they were prepared to step in and do the work.