Air NZ has 'radical' plans for Tasman routes

Air NZ head Ralph Norris says the airline is making a radical approach to lowering costs in the cut-throat transtasman market.

The outgoing chief executive told a meeting of Christchurch accountants yesterday that other airlines such as Emirates were dumping capacity on the Tasman routes and "driving yields down to unsustainable levels".

"Therefore while our current Tasman service has successfully stimulated traffic, it has not addressed our poor returns on this sector. A radical new approach and a degree of fortitude are required."

Norris said a new Air NZ group strategy was expected to be formulated by the end of this month. It would address the "bloodbath" now existing on the routes.

Giving few clues as to what kind of changes customers might see, he said that they would "continue to be at the centre of the strategy".

"We want the Air NZ transtasman customer of tomorrow to be able to check in quicker and spend less time at airports, have more space and comfort options and a level of frequency that meets their needs."

This new scheme is running in parallel with attempts by the airline to stitch together some kind of "code-share" arrangement with rival airline Qantas.

After plans to form a tight alliance were rejected by competition regulators, the two airlines are trying to share services where they can.

Qantas is about to start flying its Jetstar aircraft to New Zealand. These planes may take over leisure routes alongside Freedom, flying to secondary and provincial airports.

Air NZ and Qantas would then, in effect "share" the high paying and relatively inflexible business travellers.

Some possible changes could include:

* More wide body jets - 767s and some 747s may be used on the routes. This would mean more business class seats to get better yields.

* More kiosks and quick check-in for Tasman flights. Air NZ tries to treat the route as an extension of domestic travel, but airport queues frustrate that.

* Contracting for the Tasman routes to be flown by its subsidiary Freedom Air. Pilots and crew would be paid Freedom rates, not Air NZ money. But any moves to lower pay and conditions for crew would attract inevitable industrial disputes with a highly unionised staff.

* Re-branding more of its planes as Freedom Air aircraft. Changes at the airport would raise security fears, particularly with Australian authorities.

Meanwhile, Air NZ's defence against claims by the Commerce Commission that it ran false or misleading advertising continued in the Auckland District Court yesterday. Much of the day was taken up with legal wrangling over the admissibility of evidence from the airline's expert witness, David Innes.

The airline is facing 20 charges that its newspaper ads did not outline the true cost of travel, by separating out charges that should have been included in the "headline" fare.

Judge Stan Thorburn ruled that Innes could give expert evidence about the advertisements. Commerce Commission lawyer Todd Simmonds told the court that he was likely to ask the case be adjourned, to allow the commission to organise its own expert witnesses.