News

11 November 2014

Air New Zealand announces outcome of review to deliver more sustainable regional air services

Air New Zealand Media Release

Air New Zealand has unveiled the outcome of a comprehensive review of its regional aircraft operations aimed at delivering sustainable air services and lower prices for customers.

Chief Executive Officer Christopher Luxon says that since the beginning of 2014 the airline has had a team looking at how to address the challenges of the poor operating economics of its 19 seat fleet while at the same time leveraging the significant economies of scale available from its 50 and 68 seat fleets.

“The 19 seat aircraft is the smallest in the Air New Zealand fleet but has the highest cost per seat to operate because the fixed costs of operation are distributed across fewer passengers. This has led to Eagle Airways, which operates the 19 seat fleet, losing $1 million per month for the past two years, or the equivalent of $26 per one way passenger journey.”

Mr Luxon says that as 2014 has unfolded it has also become clear there are some regional routes where demand for seats is strengthening. “Air New Zealand has already begun putting more seat capacity into those markets and is announcing today an acceleration of that process with an additional $100 million investment in four new 68 seat aircraft.”

This brings total investment in new 68 seat aircraft to $300 million over four years and will mean that Air New Zealand will move all regional flying to either 50 or 68 seat aircraft and exit its 19 seat fleet by August 2016.

“Our average regional airfare has fallen by two percent over the past five years and today’s announcement will keep further downward pressure on regional airfares. On the 13 routes which will move from 19 seat aircraft to more cost effective 50 seat aircraft we expect to deliver a 15% average fare reduction to our customers.

“This is good news for the following 12 towns: Kerikeri, Whangarei, Tauranga, Hamilton, Rotorua, Gisborne, Taupo, Wanganui, Palmerston North, Blenheim, Hokitika and Timaru. Each will progressively move to 50 seat aircraft and benefit from fare reductions.”

Unfortunately there are a small number of regional routes where customer demand simply cannot sustain larger 50 seat aircraft and Air New Zealand will therefore suspend the following services from April 2015: Kaitaia – Auckland; Whakatane – Auckland; Whangarei – Wellington; Taupo – Wellington; Westport – Wellington and Palmerston North – Nelson. Hamilton – Auckland will also be suspended from February 2016.

As Kaitaia, Whakatane and Westport are single route ports, the suspension of these services means Air New Zealand will no longer operate to these destinations from the dates specified.

Mr Luxon says, “While today’s news will be disappointing for some communities, Air New Zealand remains resolutely committed to regional New Zealand and the changes announced today will set up our regional business model for future sustainable success.”

“I also acknowledge this news is disappointing for Eagle Airways’ staff. Eagle Airways management, staff and unions will now begin a process of determining the future of the business. The airline has 232 employees and there are good redeployment opportunities across a rapidly growing Air New Zealand Group.”

While Air New Zealand’s average regional fare has not increased in five years, the airline is today responding to customer feedback about high last minute fares on regional routes with the introduction of a new Regional Gotta Go domestic fare specifically for regional travellers.

From 1 February, regional customers will have a new option to fly to those ‘really want to be there’ events with a last minute confirmed fare available for purchase 90 minutes prior to departure at a fixed price of $169 for a single one way sector or $249 for two or more one way sectors.

“Our Regional Gotta Go fare is a confirmed seat at the time of purchase. It won’t be available on all flights, depending on demand, but the likelihood of securing a seat is generally good especially if customers have the flexibility to fly at off peak times.”

While the Regional Gotta Go fare is aimed at leisure travellers, the airline has also revised its compassionate domestic fare structure to make it simpler and easier for customers to use when they need it most.

From 20 November customers dealing with a bereavement or unexpected critical medical situation will have the security of knowing they can travel domestically at short notice for a fixed price of $169 for a single sector or $249 for two or more sectors. These fares can be booked up to seven days in advance of travel for a close family bereavement or up to 48 hours in advance of travel for a critical medical situation.

Further details are available at www.airnz.co.nz/regionalchanges

Ends

Issued by Air New Zealand Public Affairs ph +64 21 747 320