Cheaper flights will hit Air NZ profits

By CHRIS DANIELS

The transtasman and Pacific Island airfare war is heating up, with Air New Zealand now expecting profits to be dented by looming competition.

Unveiling a solid half-year profit of $105.4 million yesterday, company chief executive Ralph Norris warned the airline expected "a reasonably significant impact of increased competition on the Tasman and an ongoing fare war, that has been in place since the end of November".

"It's important for the market to understand that the competitive landscape that we see for our business in the second half of this year is significantly different from the second half of last year," said company chairman John Palmer.

Some of this new competition is set to come on the New Zealand-Fiji route, where Air NZ enjoys a cosy duopoly with Qantas part-owned Air Pacific.

This was shaken up by the pending start-up of a charter service by New Zealand's largest chain of travel agents, the Flight Centre.

It announced yesterday that the first flight of its new Fiji service had been delayed by three weeks.

Due to begin on March 19, the charter - a collaboration with aviation company Airwork - will now start operations on April 9.

A Flight Centre spokeswoman said the service had been set back because of delays in gaining permission from the Fijian Government to operate a charter service.

Gaining the approval was expected to be a formality, but time had been running out to get everything organised for a March 19 start. All passengers booked on the first 15 flights would be able to transfer their flights to later services, or get full refunds, she said.

Air NZ is in the final stages of revamping its long-haul services, with new planes, uniforms and service planned to be rolled out over the next year.

It is about to spend up to $200 million refitting its fleet of eight Boeing 747-400 planes. This will include installing personal video screens and lie-flat seats in business class.

Air NZ's budget wing Freedom Air, which launched flights to Fiji as soon as the Flight Centre announced its service, yesterday starting taking bookings on a new Christchurch-Fiji service, with tickets selling for $219 one way, plus taxes and fees.

Its first flight is due to take off on 13 May, with one flight a week.

Air NZ has often used Freedom Air as a weapon to dull the effects of new competition.

Company chief executive Ralph Norris yesterday said that Freedom had just been "given the mandate" to fly to selected destinations within a five-hour flying range.

International flights from regional ports would be done solely by Freedom Air.