ANALYSIS:
The significance of Air New Zealand's decision to press go on its long anticipated Auckland-New York flights is hard to overstate. Nobody, least of all the airline, is calling the pandemic over but deciding to fly further non-stop than ever before is a mighty marker that says it's time to get on with travel and reconnecting with the world.
Here's why the three times a week Auckland-New York flagship flights starting on September 17 are so important.
The commercial spinoff for Air NZ
Air New Zealand chief executive Greg Foran is expecting the demand to be even greater than that which supported the business case when it was first announced in 2019. Then, the airline announced it was going to fly to New York in October 2020 but Covid-19 scuppered those plans.
He and airline chair Dame Therese Walsh believe there is significant pent-up demand for the airline's long-haul international network. That's about a third of its business with the potential to be highly profitable if it can fill premium seats and sell economy tickets for the right price. This morning it was possible to buy round-trip economy fares for the attractive price of less than $2000.
Foran says he's confident New Zealanders want to travel and has a wager with some in the airline that the New York flight would beat targets already set. Walsh says work done during the pandemic has reinforced earlier modelling for demand out of the United States.
Even though the southbound flight is more than 17 hours, it avoids the need for airport transfers, something health-conscious travellers want to avoid.
Airline travel is recovering quickly around the world with schedule analysis firm OAG reporting today that capacity is within 7 per cent of pre-pandemic levels in June.
Air New Zealand is facing a full-year pre-tax loss of close to $800 million and needs this to work as part of its commercial rebuild which includes a capital raise forecast to be in excess of $1 billion.
Foran wasn't commenting on the transaction due around the end of the first quarter - which he noted was just a week away - but said the timing of the confident move was not related to the capital raise, rather about the sales period.
The airline was determined to get the flight up and running in September and the longer the booking window, the better chance of strong sales.
On the volatile but generally elevated oil price, Foran says fuel use is a big part of what airlines have to deal with.
"The longer the distance, the bigger the amount. It is an interesting environment where you've got not just the price of fuel going up, but you've got inflation generally in the economy," he says.
"Getting that equation right between getting the pricing right to drive the demand but ensuring that you're also not running a business where you're not going to be making money is part of what the team are employed to."
The Boeing 787-9 Dreamliner used can carry about 138,000 litres of fuel and at $1.13 a litre for jet fuel (cheaper to make and not taxed like petrol) it's a $155,000 equation that has to be right.
The airline is also negotiating a 787 cabin crew contract which has sparked the threat of strike action by trainers over pay for new recruits and concern about fatigue on ultra-long-haul flights. Foran says there have been standards in place for earlier long-range flights such as Chicago and he's hopeful the dispute will be resolved.
The opportunity for New Zealand
Tourism Minister Stuart Nash has had a tough 18 months in the portfolio for an industry that lost almost all its international market apart from some short-lived transtasman bubble tourists. Speaking at the launch he said Tourism NZ had run campaigns throughout the pandemic to help keep the desire by Americans to travel here and would launch another push into the US in August.
He says the health response of New Zealand will be attractive and pictures of Kiwis enjoying life, such as during America's Cup racing on Hauraki Gulf last year, will have helped. Pre-Covid the US was our third-largest source of visitors behind Australia and China. About 370,000 Americans travelled here in 2019, contributing more than $1.53b to the economy.
"The direct route to Auckland removes difficult barriers like time-consuming stopovers for travellers from the East Coast of the US. Consumers there have built up significant savings during the global pandemic and our global tourism brand is powerful," he says.
"In a world still battling Covid-19, travellers will be discerning about where they go. Our high rates of vaccination, alongside our reputation as a beautiful place to visit, will be an asset in the North American market."
Crucial "real person" links can be re-established.
NZUS Council executive director Jordan Small said a report it had commissioned highlighted the critical requirement for business, even in an age of Zoom calls, to be in the market, in person, building relationships.
Alongside Prime Minister Jacinda Ardern's planned West Coast of the US technology-focused trade engagement in May, the inaugural New York flight will provide a further opportunity to shine a momentary spotlight on New Zealand and the value in the New Zealand-United States relationship, Small says.
Symbolism
At the launch of the route at Air NZ's Auckland headquarters, there were plenty of familiar industry faces behind the masks. Some are in different jobs than they had two years ago, and most have done it tough at times during the pandemic and 800 days of closed borders. All will be much wiser.
Walsh says New York was like the airline's North Star for climbing out of the worst financial crisis it has endured.
Before ringing the bell to launch sales, she said the day was symbolic and momentous.
Foran started work at the airline while it was cutting long-haul services - Shanghai was the first on February 2, 2020 - and they disappeared quickly after that, with the airline eventually shrinking to two-thirds of its size.
He's been a study in stoicism throughout the pandemic. Today he was enjoying what he described as a buzz in the air.
"What we're doing is what we have done for the last 800 days - navigate our way through this. New York is a good stake in the ground for the international business but it's one of many things we do."
Before the pandemic, 29 airlines flew into Auckland Airport and its general manager aeronautical and commercial, Scott Tasker, is working on getting back many of the 15 airlines which haven't committed to returning. Air New Zealand's move also sends a message to them.
"It's a strong signal that airlines including Air New Zealand, as a hub-based carrier, have the confidence to rebuilding their networks, connecting into important markets and we feel positive that passengers will start moving."
The operational challenges - and opportunities.
The 14,200km length of the flight means the airline can carry up to 60 fewer passengers on the 275-seat Dreamliners to save weight and fuel, says Foran.
The southbound flight, into prevailing winds, will be especially challenging.
Before launching its slightly shorter Chicago flights in 2018 with the same type of aircraft, the airline's chief flight operations and safety officer David Morgan spoke of "war gaming" the route and it will have done the same for New York.
Weather scenarios are run, contingency plans for cancelled flights and the resulting complex crew arrangement modelling done to allow for maximum duty hours.
Putting down at alternate airports for "gas and go" stops - with new crew if needed - are built into planning. The airline will be looking to save weight on planes wherever possible.
It pioneered work on taking moisture out of planes with dehumidifiers and by frequently replacing insulation blankets. Moisture accumulates at about a kilogram a day and during the life of a plane can add up to half a tonne of extra weight.
For Chicago Air New Zealand stationed more pilots and cabin crew to cover contingencies than in other destinations, and they stay in hotels where their access to the airport wasn't affected by snow or ice.
The airline's soon-to-arrive new chief operating officer Alex Marren has had extensive operational leadership experience with United Airlines on the US East Coast, acknowledged as one of the toughest parts of the world to run an airline.
While the New York service will be operated with 787-9s already in the fleet, the airline will within the next two years start taking delivery of a new tranche of Dreamliners - also 9-series planes - that will come especially fitted for ultra-long-range flights.
They will have around 220 seats and be fitted with what Foran says will be world-leading new business class seats.
