Air NZ revamp tries to please everybody

By CHRIS DANIELS

Air New Zealand is hoping that its new cheap airfares will scare off cut-price competitors while keeping premium customers happy.

By adopting the low-cost, low-flexibility approach of overseas budget airlines, Air New Zealand said yesterday that it hoped to stimulate the domestic air travel market by up to 20 per cent.

Air New Zealand fares on the main trunk route will drop by about 28 per cent, and by an average of 20 per cent over the domestic network.

Fares to and from provincial centres will drop by up to 20 per cent and on average about 10 per cent.

But the changes are expected to have little effect on revenue.

By adopting a range of fare types, each with different conditions, the airline is hoping to attract no frills budget travellers - with so-called "use it or lose it fares" that do not earn airpoints and cannot be transferred or refunded.

It is also hoping to keep its premium business passengers with more expensive fares that can be transferred, refunded and earn airpoints.

The business travellers' Koru Lounge at Auckland Airport will be made 50 per cent bigger.

Chief operating officer Andrew Miller said yields per seat would drop after the introduction of the express service, but there would be more seats on each plane.

Average loads are expected to increase to make up for the loss on the lower ticket prices. Most of this increase in seats comes on the main trunk routes, where business class seats are being removed.

Costs are easier to cut on these main routes, as many of the smaller planes going to regional centres do not have business class anyway, and many do not serve meals.

Keeping the travel agents happy will be one of the big challenges for the new-look domestic Air New Zealand, which has axed its flat commission payments.

The Travel Agents Association has launched a public relations campaign after the birth of Air New Zealand Express, saying that the airline was trying to avoid paying the cost of distributing its products.

By directing customers to use the internet to find its cheapest fares, Air New Zealand was trying to remove the ability of passengers to discover which airline was offering the best service.

Miller said the company had recently achieved cost savings of up to 30 per cent when renegotiating some of its aircraft lease arrangements.

This was due to the glut of aircraft in the world market, which enabled Air New Zealand to do some "ruthless negotiating" with aircraft owners.

About 200 jobs have gone from Air New Zealand as part of the express service, mostly from the cabin crews.

Part two of the restructuring plan involves the expansion of budget subsidiary Freedom Air's transtasman operations.

Flights will be provided to Queensland from Auckland, Wellington and Christchurch.

Norris said the airline would be taking delivery of the first of its 15 new Airbus A320 jets in October next year.

These aircraft will replace the Boeing 767-200s and some of the older Boeing 737-300s over the next four years.

The aircraft would enable the company to "introduce a completely new style of Air New Zealand service on the Tasman and short-haul Pacific routes", he said.

The third stage of Air New Zealand's restructuring will be the "revitalising" of its long-haul international routes to Europe, Asia and North America.