Air New Zealand will begin direct flights to New York from Saturday. Photo / NZME
Air New Zealand chair Dame Therese Walsh is adamant there is room for both Air New Zealand and Qantas to fly the Auckland to New York route.
Air New Zealand will begin flying direct to New York on Saturday September 17. Last month Qantas announced it too would begin flying the same route from June.
Walsh said the move by Qantas had not changed its business case for the flights, which will become its flagship route.
"We always expect to have competition wherever we are flying. Wherever we go. If you look at New York as a market, which is part of the reason we are going there, it is such a significant market," Walsh said.
She said the latest research from Tourism New Zealand suggested there were over 60 million Americans actively considering New Zealand as their next holiday destination.
"If you take a rough rule of thumb New York would be about five million of those and we know that New York is in that higher income bracket," Walsh said.
"From a markets perspective it is a huge opportunity and we don't feel concerned at all. Qantas flying to New York is no different to how we compete with them every day."
Walsh said there was a lot of capacity to come from New York back to New Zealand and via New Zealand to Australia.
"There is a lot of opportunity for everyone."
Forsyth Barr head of research Andy Bowley said the new flagship route would be important for Air New Zealand but it was unclear at this stage how much of an impact it would make on the airline's bottom line.
Bowley said the business case for the New York flights was undertaken in quite a different fuel price environment.
Air New Zealand originally planned to start direct flights to New York in October 2020 but that was delayed, with the global pandemic closing borders worldwide.
"Given the duration of the flight and the amount of fuel necessary to particularly fly those last few hours it will be a higher cost exercise than what would have been the original business case," Bowley said.
He said the decision by Qantas to fly the same route would also impact the broader competitive environment.
"It does impact the competitive dynamics."
Qantas also plans to fly direct to New York from Sydney and Melbourne but that won't start until late 2025.
Bowley said price would be important but the challenge Air New Zealand had, particularly in attracting Australian transit passengers, was the loyalty component that Qantas would have over its customer base.
"There are some dynamics at play that will clearly impact the profitability of the route for Air NZ. Any competition in any market reduces the level of return an individual participant can make."
Walsh conceded the Qantas move could mean it lost some potential Australian travellers.
"But conversely the more airlines flying on a route the more interest there is. The more demand you see coming through," Walsh said.
"In a funny way you could get a reverse impact as well where there is more knowledge and more market research done on 'who am I going to fly with?' We are going to compete hard just as we always do."
Walsh said it saw China, the US and Australia as key tourist markets but North American tourists tended to spend more time in New Zealand on average and more money.
"They tend to be here for up to 14 days and they spend more. But also they spend time in the regions."
It was estimated the North American tourist market could be worth up to $65 million annually to New Zealand, Walsh said.
Asked whether New Zealand's tourism industry was ready for the influx of visitors, given its lack of workers which has seen some hotels reduce cleaning services, Walsh said she was cautiously optimistic.
"I think we all know that this is coming - the borders are open and people are starting to travel. We can see the demand for travel both domestically and internationally [is] strong. And so the rest of the NZ tourism industry can see this as well. This influx is starting to occur."
But Walsh said there would be aspects where New Zealand would have to lift its game.
"We are going to have to increase capacity for various activities or accommodation. The reality is everyone knows that and is preparing for that. I am not trying to underestimate the labour issues because they do exist. But they are in the US as well."
She said New Zealand would need to work creatively to fill the gaps.
"We are going to have to rally both as a country and tourism industry to meet that demand as it continues to grow."
Opening up direct flights to New York will provide opportunities for New Zealand exporters of fresh produce to take it direct to the market, Walsh said.
The airline launches its inaugural flight on Saturday in a push for US tourists estimated to be worth $65 million to New Zealand annually. Prime Minister Jacinda Ardern had planned to be on the flight but will instead head to London to attend the Queen's funeral.
A second trade delegation led by Deputy Prime Minister Grant Robertson will follow in October with 40 business, political and media attendees to fly on a trip with Air New Zealand chief executive Greg Foran and chair Walsh.
National's deputy leader Nicola Willis will also be on the flight.
Walsh said there was a big economic opportunity for New Zealand in terms of the route.
"We would expect it to open up opportunities for New Zealand businesses to connect into that part of the US. And also for US businesses to have more opportunity to get down here because people want to fly direct. We are seeing it as a very strong business proposition and of course there will be the associated cargo."
Walsh said the interest was particularly strong for those with fresh produce.
"We are now going to create an opportunity where you could have freshly caught salmon on a New York restaurant table within 48 hours and previously you would have to transit and do stopovers through California."
Air New Zealand expects to carry around 8,000kg of cargo per flight to New York, which will primarily be flowers and seafood, including clams, salmon and eels.
At three flights a week that works out to be around 1.25 million kgs a year. The return trip has more limited capacity for cargo due to extra fuel requirements.
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