KEY POINTS:
The introduction of two levels of economy class seats on Air New Zealand's domestic and transtasman services means the airline will be uniquely combining in one plane conditions that are found separately on so-called "full service" and "low cost" (or "no frills") airlines.
Air NZ's new "domestic experience"
- its response to the challenge of low-cost carriers Pacific Blue and, possibly later, Qantas' Jetstar - was spelt out by the CEO, Rob Fyfe, at the airline's announcement of its annual results this week. The changes will start to be introduced "by mid-next year".
Fyfe said the B737 aircraft operating on domestic services would be divided into two zones: one incorporating the current 86-89cm seat pitch, with complimentary snacks and beverages supplied on most flights, and catering specifically for frequent flyers and business travellers; the other with the seat pitch reduced to 76-79cm, similar to the airline's competitors, and with snacks and beverages to be paid for.
Fyfe said that these arrangements were to be adopted instead of creating a new airline to meet any domestic challenge, but the changes will also be partly reflected on Air NZ's transtasman services. While retaining their current business class, both the A320 aircraft and the bigger B767-300s, used mainly on the Auckland-Sydney route, will also have two economy zones.
This would appear to have implications for Air NZ's low-cost subsidiary, Freedom Air, especially if arrangements in the larger, lower-fare economy section on Air NZ's transtasman flights become comparable with those offered by Freedom. In those circumstances, it is possible that Freedom will not survive the changes.
According to its website, Freedom operates two or three flights a week from each of Hamilton, Palmerston North and Dunedin to Sydney and Brisbane, and six flights a week from Auckland, and two from each of Wellington, Christchurch and Hamilton to the Gold Coast.
The services from secondary airports Hamilton and Palmerston North, which are used mainly by New Zealand origin passengers and attract relatively few from Australia, would seem most at risk. Those routes are also less likely to attract competing airlines unless they could use aircraft smaller than Pacific Blue's B737-800s or Jetstar's A320s, both of which carry significantly more passengers than Freedom's B737-300s.
However, Dunedin, as a gateway to southern areas of the country, has more evenly balanced traffic and may therefore have a better chance of being served transtasman by the reconfigured A320s.
The future of Freedom Air was not mentioned by Air NZ this week, but with the announcement of the new arrangements to be introduced next year, it may not be long before Freedom's fate is made known.
Earlier this year, Fyfe predicted that the next area of airline competition could be on the ground, with advantage going to airlines that succeed in streamlining a passenger's journey through the airport. This week he confirmed that changes are afoot and said details would be announced at the annual shareholders' meeting in October.
The aim will be to reduce by at least 25 per cent the time passengers spend in airports prior to departure. Online check-in and seat allocation have been successfully trialled for domestic services and are likely to be extended to transtasman and Pacific flights.
The process is more difficult to implement for long-haul flights because of visa complications, with airlines being held accountable for any error in carrying travellers lacking the requisite documentation.
However, Fyfe sees some analogy between airports and banks, which tend to have fewer tellers than previously and more staff in other, customer assistance-type roles.
He has also confirmed that the need to check in luggage may give way, at least in part, to the use of radio frequency identification (RFID).
Under this technology, electronic tags that record passengers' details can be "interrogated" by the system so that, provided the necessary security system is in place, passengers would be able to place RFID luggage directly on a conveyor belt.
Meantime, much of the innovation over the past year related to Air NZ's long-haul international services, principally the second daily service to London Heathrow via Hong Kong and the new service to Shanghai, together with the introduction of lie-flat beds in business class and the introduction of "premium economy", which have been the main contributors to increased yield.
With these changes, load factors on both routes to London have reached 80 per cent, with Air NZ's market share between Britain and New Zealand increasing from 27 to 40 per cent.
Whereas previously Air NZ's market share on the British route was hit hard by British restrictions that allowed only one daily service and by outmoded cabin conditions that ceded advantage to competing airlines, the increase to 40 per cent brings the route into line with Air NZ's long-term average inbound market share of between 40 and 45 per cent.
What is less immediately apparent is that ways to travel to and from Europe as well as Britain have been increased and varied by Air NZ connecting with and code-sharing on Star Alliance partners such as United Airlines and Lufthansa, and also Virgin Atlantic. Such connections can now be made at Los Angeles, San Francisco and Hong Kong, and soon probably Shanghai also. From November, the new service to Vancouver will allow co-operation with another Star Alliance partner, Air Canada, on yet another route to London.
* David Stone is an independent aviation commentator and consultant.
