Fare cuts aim to fill seats

By CHRIS DANIELS aviation writer

Air New Zealand is hoping its new Tasman Express service will increase the market by 10 per cent, with more Australians taking holidays on this side of the Tasman.

Based largely on the savings it will make with its new fleet of Airbus A320 planes, Air New Zealand yesterday announced average fare cuts of 20 per cent on all its transtasman flights.

Food and alcohol services will remain, but fewer special meals will be available. Strict "use it or lose it" provisions will apply to its lowest fares, which will not earn frequent flyer miles.

Air New Zealand says Australians make up 32 per cent of all visitors brought by the airline to New Zealand. Of New Zealanders flying to Australia, 44 per cent fly with Air New Zealand.

Airline chief operating officer Andrew Miller said the introduction of Tasman Express would be unlikely to have any immediate effect on the company's profits.

Its development was not a reaction to what present or potential competitors were doing, but a "fundamental tackling of where the growth opportunities lie in the market. That's clearly Australia and New Zealand".

Miller said the business and "high-end economy" parts of the market had not been increasing. What was growing was the price-conscious, holiday market. This did not just mean lower-income people starting to fly, but also existing travellers flying more often.

Air New Zealand is saving money on its Tasman routes in three main ways. The first and most important is the better efficiency - around 15 per cent on a per seat basis - of its new Airbus A320 aircraft, which start arriving at the end of next month.

The second is the money saved from axing commission payments to travel agents, moving customers to using the internet and call centres to book their travel.

The third, and less significant, saving is from the move towards lighter meals.

The Flight Centre, New Zealand's largest chain of travel agents, yesterday gave Tasman Express a chilly greeting.

Its corporate division head, David Burns, said the new service was great news for leisure travellers, but not so good for business travellers, who would notice a big difference in the product, for no benefits.

He said a return business class airfare to Sydney on the new service was $1538, compared with a full service flight on Emirates for $1099.

James Langton, president of the Travel Agents Association, said the news that Air New Zealand would no longer pay commissions on transtasman travel had been met with a subdued reaction.

"We acknowledge that $189 is a good one-way fare - but take $189 and double it, that's $378, then add on the $50 that Air New Zealand travel centres or reservations are going to charge and you've got a fare of $428, plus taxes, which are up to $109."

The fares came with no airpoints earned, and other airlines were already offering fares of $399.

"The Travel Agents Association welcomes the initiative of cheap fares. If it stimulates the market we're in favour. But the travelling public have got to understand they are only Air New Zealand fares and a travel agent can give you the option of all the airlines, which is important - really important if the customer is trying to save money."

Tourism Industry Association chief executive John Moriarty said the airline had brought in a product that it knew worked domestically, and was being used as a business model to extend to Australia.

It showed they had a reasonable handle on how to make the market grow, which was a good thing to see.

"It was a model that had not been tried in Australia, which would hopefully encourage more Australians to come and visit New Zealand on holiday.

"We've done quite well getting Australians over here," he said. "This might make it even better."

One potential bone of contention raised by the new fares will be the methods Air New Zealand uses to advertise them.

Australian travellers will be shown the new fares in an all-inclusive format - with all charges, levies, taxes and fees built in.

But because Tasman Express covers international travel, Air New Zealand feels it does not have to include all the extra charges in its advertising to New Zealand audiences.