United Airlines will fly 787 Dreamliners to Christchurch and Auckland next summer.
United Airlines’ announcement of a big expansion into Aotearoa next summer is a sign of a deepening alliance with Air New Zealand. How does the long-standing partnership work and what does it mean for passengers?
What has United announced?
As part of its largest South Pacific expansion, United will operate nearly 40 per cent more flights from the US to Australia and New Zealand next summer. It will build on its position as the largest US airline to Auckland, adding four weekly flights from Los Angeles to its year-round existing service from San Francisco. United will fly its Los Angeles-Auckland route on a Boeing 787-9 Dreamliner, starting October 28.
Starting on December 1, United will launch a non-stop San Francisco-Christchurch service. United will fly this route three times weekly with a Boeing 787-8 Dreamliner. The last link from Christchurch to the US was an Air NZ twice-weekly service to Los Angeles which ended in 2002. United’s new flight to Christchurch is part of the airline’s broader expansion efforts in New Zealand, which next summer will be nearly 70 per cent increased in New Zealand than in 2019, before the pandemic.
How does the alliance partnership work with Air NZ?
The United alliance with Air New Zealand stretches back to 2002 and is much deeper than a codeshare agreement, where multiple airlines can issue their own tickets on a codeshare flight but revenue is not shared. There are also very broad airline groupings; Star Alliance (which includes Air NZ and United), Oneworld and Skyteam, where airlines can work together to smooth passenger journeys. But a revenue-sharing alliance such as the United-Air NZ one is an extensive commercial agreement in which two or more airlines agree to co-operate on all aspects of pricing, scheduling and service delivery. They need to be approved by regulators in countries where the airlines fly.
Air New Zealand’s chief transformation and alliances officer Mike Williams says given this country’s location, partnerships are especially important to get people to where they need to go.
Air NZ has revenue-sharing alliances with Singapore Airlines, Air China, and Cathay Pacific as well. Where they can, the partners operate as joint businesses.
“You look at it as if you’re a single entity, a joint business where you can ask: what’s the best thing for us to do together?”
Wiliams added: “What we ultimately try to do with these agreements is make sure that at the commercial level, there are incentives for both parties to continue to grow the routes where we’ve got that authorisation in place. It’s a win-win [for airlines], and then a win for customers as well.”
How do airlines split the revenue?
Williams says the airline operating a particular flight takes the revenue for it even though a passenger may have booked on the other partner airline. There is a regular, complex reconciliation process where the money is paid between the airlines. Each of the different confidential agreements covers the division of revenue.
Does this mean airlines are agnostic about whose planes passengers fly on?
“We’re not concerned about that at all. We don’t compete with our alliance partners within that authorised scope,” says Williams. “The bottom line is really that the better United do [on the new routes], the better Air New Zealand does. It will be the same with all four of our revenue share alliances, and that allows us to grow capacity faster than otherwise would be possible.”
Under the rules, deep alliance partners can discuss pricing, unlike when competing against rivals. How does that work?
In each of the alliances, that’s authorised with a very specific scope.
“And that scope covers geography to the roots which are included in the authorised arrangement, as well as within that geography, capacity and pricing. Every now and then, there are small exceptions which get pretty detailed, but generally speaking, those authorisations allow the airlines involved to co-ordinate capacity and make sure pricing is consistent, because what we don’t want to have is customers seeing wildly different fares for what’s effectively the same product.”
What does United’s expansion next summer mean for airfares (which for international routes have increased close to 17 per cent over the last year)? If airlines are working with each other, does this mean they’ll charge the same prices?
Williams says travellers will win from the United expansion.
“The important thing to note is this is more capacity coming into the market during the northern winter. The biggest driver of pricing is capacity. With this additional capacity coming in, there’ll be more cheap seats available, particularly in that part of the year, when there’s a lot of demand for flights to and from New Zealand.”
Air NZ flies Auckland-Los Angeles daily. Was the route always available for United to fly as well?
“That’s always been available to us. The regulators authorise within a certain scope and, by and large, that’s really all routes between New Zealand and the US. We didn’t have to go back [to them] because that’s within what has already been authorised.” Williams says although Air New Zealand operates directly to four other mainland US destinations, it doesn’t have anywhere near the muscle of an airline like United, the world’s biggest by available seat kilometres and connected to hundreds of US domestic and international destinations.
“They’ll be tapping into their frequent flyer base and all of their distribution channels and be able to access customers not just in those five big regions that we fly to, so that’s a real big benefit to bring those customers into NZ. Air New Zealand tourism benefits and we’ll carry a lot of [inbound visitors] domestically.”
Another rival US airline, Delta, will next summer start daily flights between Auckland and Los Angeles. Are the United-Air NZ Los Angeles services a move to protect a route the Kiwi carrier has had to itself since American Airlines pulled off that service?
No, says Williams. “It’s not really defensive at all. We’ve been looking at this for a while. So it’s not in response to Delta. Clearly, Delta is seeing what United is seeing - huge interest from the US market to come and explore not just New Zealand, but Australia as well.” The big United expansion came after a visit to New Zealand by the airline’s senior vice-president of global network planning and alliances, Patrick Quayle, in early March. He told the Herald then that his airline was looking at a “number of opportunities” to increase services between NZ and the United States.
How do loyalty programs splice into each other?
“Seamlessly,” Williams promises. Part of the rationale for these alliances is not only consistent capacity, faster growth and more sustainable operations, but then to also integrate frequent flyer programmes so New Zealand customers can earn and burn on much of the United network and vice-versa.
Passengers have previously complained about onboard products and services being inconsistent between airlines. Is Air NZ confident that there will be consistency?
Williams says United has top-level products, including its Polaris business class and premium economy.
“That’s always a consideration for us whenever we work with new partners, and we have our customers buying on someone else’s aircraft. We want to make sure that our customers get the best possible experience.” The airlines’ qualifying passengers use the acclaimed Star Alliance lounge at Los Angeles Airport, which Air NZ operates.
*United today reported a US$256 million ($415m) pre-tax loss for the last three months, consistent with expectations provided in March. It said its total operating revenue of $11.4 billion, up 51.1 per cent compared to first-quarter 2022.
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