Editorial: Singapore deal shows Air NZ serious about growth

Air NZ is intent on growth. Photo / APN

The airline industry is nothing if not ever-changing. Just eight years ago, Air New Zealand was pulling out of Singapore, and the island state's government was urging Singapore Airlines to pursue links with Qantas. According to Air NZ's then chief executive, Rob Fyfe, Singapore was a very small market and most of the airline's passengers would be equally well-served by travelling through Hong Kong.

Now, however, Singapore has become very much the focus as Air NZ bolsters its position on routes in the booming Asia-Pacific region.

The vehicle for this expansion is an alliance with Singapore Airlines, which, through codesharing and sales co-ordination, gives Air NZ access to the Singapore carrier's huge Southeast Asian network - including its SilkAir subsidiary - and beyond to India, Africa, Britain and Europe.

Additionally, Air NZ will resume flying its own aircraft between Auckland and Singapore, taking more than half of the flights operated by Singapore Airlines, and share revenue with the Singaporean carrier from all flights on the route.

The closer tie-up represents not only a return to Southeast Asia after a period of focus further north but confirmation that Air NZ is intent on growth. It has been seeking new partnerships rather than operating alone as a small carrier, albeit one that will be strengthened by the delivery of the first of 10 new Boeing Dreamliners in mid-year. Singapore Airlines had become a logical candidate.

If Air NZ had struggled to fill its aircraft while last flying to and from Singapore, its departure from there had created an obvious gap in its network. More than that, the new agreement with one of the strongest airlines in the region offers considerable potential for both the airline and this country's tourism industry. Tourists from relatively untapped sources such as Indonesia and India will, thanks to greater flight frequency and enhanced travel options, now have a far smoother passage to this country.

Singapore Airlines, likewise, has been seeking partners, but has struggled to reach agreements with airlines in China and Taiwan. According to the partners, the deal could boost their existing capacity between New Zealand and Singapore by up to 30 per cent.

There is also the possibility of closer ties with Virgin Australia, in which Air NZ and Singapore Airlines are among the major shareholders.

Further down the road, it is conceivable that their burgeoning relationship could lead to a joint bid to privatise the Australian carrier. As it is, the new agreement increases pressure on Qantas, whose woes are currently the subject of a strategic review that could culminate in some form of Australian Government financial aid. It has paid a heavy price for paying substantial attention to its role as Australia's national flag carrier.

Air NZ, to its advantage, attaches a lower priority to flying the flag. Being much smaller, it has also been more fleet of foot. It quickly, for example, closed down operations in Beijing and made Shanghai the centre of its operations in China. It has also been able to concentrate on the Pacific Rim, a fortuitous situation because that is the world's fastest-growing travel market.

The extended network effectively realised by the agreement with Singapore Airlines provides a comprehensive means of tapping that growth.

Many New Zealand travellers will relish the return to Singapore. Changi is one of the world's leading airports. There is also the possibility that increased capacity will result in cheaper fares, as well as greater choice. That will become clearer when the airlines seek the approval of competition authorities in New Zealand and Singapore.

For the moment, however, the national carrier's adeptness and ambition warrants praise.