Business class service faces chop on Air NZ short hauls

By DANIEL RIORDAN aviation writer

Air New Zealand management has presented recommendations to directors which are understood to include the removal of business class services on domestic flights.

The airline has been reviewing its short-haul routes (less than four hours) as part of a cost-cutting exercise.

Air NZ chief executive Ralph Norris has indicated that a no-frills type of service for short-haul flights is being considered.

But aside from that, the airline has given little indication of its intentions.

Travel industry and aviation union sources contacted by the Business Herald yesterday said they expected the airline to adopt no frills, one-class services on domestic routes.

While the airline is not expected to do the same on the major transtasman routes to Sydney and Melbourne, the no-frills model could also be applied to more tourist-oriented destinations, including Brisbane and the Pacific Islands.

Domestically, the eight business class seats on a 737 could be replaced by 12 economy seats, and one less cabin crew attendant would be needed.

Though cutting costs, the move would place the airline under greater pressure from Qantas in the lucrative corporate market.

Just how many business class travellers chose to move to Qantas in the absence of cooked meals and business class seats on Air NZ would depend on how Air NZ priced its new service.

Yesterday was a busy day for Air NZ watchers.

The company released its March operating statistics, which showed load factors up to 82 per cent, compared with 71 per cent a year ago.

This was thanks to revenue passenger kilometres (RPK) being 7.8 per cent higher and capacity (measured by available seat kilometres) being 7.7 per cent lower.

Year to date figures showed RPKs down 1.5 per cent, capacity down 3.5 per cent, and load factors up from 72 per cent to 74 per cent.

The company also said that this week it had finalised a $200 million two-year revolving credit facility led by the National Bank.

The airline has also extended its leases on four Boeing 747-400 and two Boeing 767-300 planes for between three and seven years.

The airline's engineering business - ANZES - has secured a major contract to do maintenance and reconfiguration work on up to 15 Boeing 747-400 planes owned by Qantas. The work is worth between $13.5 million and $16 million, and will be carried out in Auckland, beginning this month.

ANZES routinely does maintenance work for other airlines.