KEY POINTS:
Air New Zealand's failure to get a code-share agreement with Qantas last year has not proved the make-or-break issue on the Tasman that it expected, new operating figures show.
Quite the opposite - the airline is flying fuller planes and making more money from each passenger.
Load factors - the measure of how full planes are - on Air New Zealand's Tasman and Pacific routes jumped nearly 9.4 per cent to 77.4 per cent last month compared with a year earlier. Passenger yields (the amount of money made from each passenger) on short-haul routes, which include the Tasman, were also up 9.3 per cent.
February is the biggest month for tourism in New Zealand.
The strong operating numbers, which showed improvements across all services, were released amid controversy over domestic flight over-booking.
Consumer Affairs Minister Judith Tizard has urged passengers bumped from over-booked flights to seek compensation from Air New Zealand.
But aviation analysts yesterday dismissed any risk of increased bills for compensation as unimportant. Investors agreed, with Air New Zealand shares rising 9c to close at $2.12.
Deutsche Bank aviation analyst Jason Bloom described the February figures as "excellent".
There were strong indications of a turnaround on the Tasman, he said.
"I certainly don't think the Tasman is anywhere near as unprofitable as it used to be and they are probably making a bit of money on it now," he said.
The decision to cut capacity on the route was paying off, he said.
In November, Air New Zealand responded to the code-share knockback by cutting capacity on the Tasman.
It axed some flights - out of Wellington in particular - and moved to smaller A320 planes on some services. At the time chief executive Rob Fyfe warned that an even bigger shake-up on the Tasman was possible.
Norm Thompson, Air New Zealand's group general manager of short-haul, conceded things were starting to turn around on the Tasman, even without a code-share agreement.
But it was still a difficult route and more work was needed to get its returns into line with other parts of the business.
"It's not where we want it to be but we're heading in the right direction," he said.
The company had wanted to get Tasman load factors up above 80 per cent, he said.
"When you're operating a semi-low-cost model you need to have your load factors up there."
Some people might now see the arguments for the code share as redundant but he argued the capacity cut was a less desirable way to achieve good results.
It meant offering passengers less choice on the route than they might otherwise have had, he said.
Thompson was not prepared to comment on the issue of over-booking seats.
Some analysts have suggested that the airline might be a victim of its own success as fuller planes cause more passengers to get bumped.
However, although domestic load factors have increased by more than 10 per cent since 2002 that is unlikely.
Passengers who are bumped from flights tend to be travelling in the peak periods early in the morning and in the early evening.
It understood that load factors at those times have remained constant for several years and growth has come largely from more travellers flying in the middle part of the day.
Yesterday's numbers showed the benefits of reducing capacity at a time when demand had remained solid, said Marcus Curley, aviation analyst at Goldman Sachs JBWere.
Long-haul yields were the other highlight of yesterday's numbers, he said.
The airline's long-haul year-to-date yield was up 12.1 per cent.
* Air New Zealand yesterday announced an increase to services between Auckland and Adelaide. From October this year it will add another two return flights, taking the number of services to five a week.
