Air NZ to cut routes and reduce capacity

Air New Zealand is to cease flying to Singapore as it shifts focus from South to North Asia.

The move is one of several route changes unveiled yesterday as the airline said all long-haul flights would now be subject to constant review.

Air NZ will also cease flying from Christchurch to London via Los Angeles and will reduce capacity on flights from Auckland to London via Los Angeles.

Chief executive Rob Fyfe said the moves were part of a strategy to be faster and more adaptable than competitors as the industry grappled with record-high fuel prices.

Normal airline practice was to review route structure once or twice a year.

"We are trying to adopt a more flexible and nimble approach," said Fyfe.

All routes would now be under constant review and a special unit of three network specialists had been set up to crunch the numbers.

Fyfe refused to disclose what the total cost-saving of yesterday's changes would be.

As they are effective from October, they will not have an impact until the 2007 financial year.

Air NZ has already confirmed it will make a pre-tax profit of about $140 million this year - down 40 per cent on last year.

It has also warned that 2007 could be even tougher as the airlines' fuel hedges roll off and higher prices for jet fuel start to bite.

Fyfe did offer one example of the kind of savings he was looking for.

The decision to operate a new 777 instead of the slightly larger 747 on both services from Auckland to London via Los Angeles would save the airline $62 million a year in fuel costs alone.

That didn't account for the extra staff costs on a 747 or the gains to be made by better using the larger plane elsewhere.

"It's just so tight," Fyfe said. "There is a big prize for getting the right aircraft on the right route based on what the projected numbers are going to be."

The purchase of eight long-haul Boeing 777 aircraft had made the new degree of flexibility possible.

The 777s have a smaller capacity than the 747 - 313 passengers compared with 393 - but can effectively cover the same distances.

"They allow you to enter a new market without to having to take such a big risk," Fyfe said.

He said the decision to cease flying to Singapore was made because there was now much greater growth potential in North Asia.

Most passengers flying through Singapore were connecting with another service so were equally well served by Hong Kong airport.

As a final destination, Singapore was actually a tiny market.

Just 40 passengers a day were flying from New Zealand to Singapore as a final destination, and about 80 a day were making the return trip. Three times as many passengers were already travelling between Shanghai and New Zealand, and Air NZ had not even begun its direct service yet.

The more point-to-point traffic on a route, the more efficient that destination became as a hub.

Air NZ accounts for just 30 per cent of capacity between here and Singapore with its Star Alliance partner, Singapore Airlines, handling the bulk.

Route changes

* Flights from Auckland to London via Singapore will cease. An additional London flight will be added via Hong Kong.

* Capacity on Auckland to London via Los Angeles will be reduced by 160 seats with a switch from 747s to the new 777s.

* Christchurch to London via LA - previously twice weekly in the summer - will not recommence this season.

* The changes are effective from October.

* The frequency of flights to Tahiti could also be reduced.