Air NZ to scrap domestic business class, expand overseas

5.15pm

Air New Zealand today announced plans to scrap business class service on domestic routes while expanding its trans-Tasman and international operations.

The changes, part of a plan to resurrect the ailing airline following last year's disastrous run, will be implemented in three phases over the next 18 months.

Around 200 Air NZ employees will lose their jobs as a result of the restructuring plans.

The airline will introduce an "Express class" service on main domestic routes operated by its Boeing B737 fleet, starting October 27.

Air NZ Express aircraft will be fitted with 136 seats, compared to 122 at present. Room for the additional 14 seats per aircraft will be gained by removing the separate business class cabins.

The airline says Express class will offer substantially lower fares, which will be announced in July.

Freedom Air to expand

Air New Zealand subsidiary Freedom Air's trans-Tasman operations will be expanded to provide new, low-fare services to Queensland from Auckland, Wellington and Christchurch, in addition to its existing trans-Tasman services.

The new Freedom Air services will go on sale in July for flights commencing on October 27. The Freedom Air Boeing 737 fleet will be increased from 4 aircraft to 5.

Freedom Air operations on core domestic main trunk centres (Auckland - Christchurch, Auckland - Wellington) will be maintained.

International short-haul changes

Air New Zealand will expand its capacity on international short-haul (Tasman and Pacific Island) routes in November. The key changes are:

* Auckland to Sydney: the number of flights per week will increase from 20 to 28.

* Auckland to Fiji: the number of flights per week will increase from 7 to 8.

* Christchurch to Sydney: the number of seats available per day will increase 38 per cent with the change from two daily B737-300 services to a B767 operation.

International long-haul service expansions

International long-haul routes to the United States and Asia will be expanded this year. The key changes are:

* Auckland - Los Angeles: the number of flights per week will increase from 10 to 14 from November.

* Auckland-Honolulu: the number of flights per week will increase from 2 to 3.

* Auckland - Tokyo: capacity was increased 23 per cent last month with the introduction of daily services to and from Narita.

* Auckland - Kansai, Japan: the number of flights per week will increase from 6 to 7 in November.

* Auckland-Hong Kong: the number of flights per week will increase from 5 to 7 in November.

* Sydney-Los Angeles: the number of flights per week will increase from 3 to 5 in November.

Frequent flyer programme to change

The airline says that, from October, changes to the Air Points system will provide more points-earning opportunities for frequent domestic flyers using the new Express service.

Online bookings

The Air NZ website will be upgraded to provide Express customers with simplified booking, purchase, and seat selection processes. The first improvements in "look and feel" will take effect in July, with more substantial changes effective in October.

Financial impact

The company said today its financial performance was ahead of targets for earnings and gearing contained in the 5-year plan produced to support its recapitalisation at the beginning of this year.

The revenue impacts of fare reductions in the implementation of the first phase of the strategy were expected to be offset by operating cost reductions, some market stimulation, and some market share gain.

It said future year targets remain "very challenging" and offered no further earnings guidance.

Shares in the national carrier bounced 4 cents to 62 cents -- their highest level since September 2001 -- prior to the announcement, which was made just after the local market's close.

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