Air New Zealand

End of line carriers increasingly relying on partners to serve China

Air New Zealand's decision to end Auckland-Beijing services in favour of a one-stop service on its Shanghai flight with onward connections by partner Air China is the latest example of the difficulties 'end of line carriers' in Australia and New Zealand are having serving China, which is a top trading partner for both.

Ending services to Beijing is not a light decision given how coveted Beijing slots are, but Air New Zealand's move is not unprecedented. Qantas in 2009 made the exact same move, ending Beijing service in favour of a one-stop partner connection. Qantas also bolstered its Shanghai schedule, which Air New Zealand is doing too with progressive daily service.

Air New Zealand hones in on long-haul restructure as first half profit falls

Air New Zealand is nearing a conclusion of a restructure of its loss-making long-haul network. At the peak of losses in the six months to 30-Jun-2011, the operation lost in excess of NZD1 million (USD833,700) a week. While the losses were exacerbated by high fuel prices and weakened demand from the Feb-2011 Christchurch earthquake and the Mar-2011 Japanese earthquake and tsunami, ANZ has seen the entrance of price-aggressive long-haul carriers that give reason to strategically enhance its position across all markets.

CEO Rob Fyfe has said no long-haul market has been significantly positive or negative, unlike with Qantas’ Aug-2011 restructure in which losses had been heavy in Europe and Asia. Adjustments to the long-haul network, some already implemented with others to be announced in coming weeks, comprise adjusting frequency and capacity to existing and new routes, working with partners, bolstering ancillary revenue and evaluating aircraft capacity as well as fare and product structure.

Qantas cuts international services to grow profitable domestic market as Jetstar grows all around

Qantas is making significant competitive responses to invigorated challenger Virgin Australia’s push in the lucrative Australian domestic market. Qantas will withdraw international routes and re-allocate aircraft primarily to the domestic market to keep the 65% market share it believes is optimal for overall performance. Additional network changes will right-size its fleet to demand while the company looks to shrink engineering facilities due to aircraft retirements. For its planned Asia-based premium carrier, Qantas will pursue a capital light option in which an airline partner – likely Malaysia Airlines (MAS) – shares part of the risk.

The story is more positive overall at the group’s low-cost subsidiary Jetstar, which posted its largest-ever underlying profit. The carrier is benefitting from increased yields in Australia while its Singapore operation has held up profitably despite its competition, Tiger Airways, not being able to profitably absorb significant capacity increments.

Sydney Airport divides terminals along alliance lines but risks alienating new carriers

Sydney Airport will narrow its competitive disadvantage of having separate domestic and international terminals with a plan to split its terminals by 2019 into two alliance-based precincts: one for Qantas and its partners and one for Virgin Australia and its partners. The two groupings will account for 81% of all movements. Leftover international carriers will in most cases use the Virgin terminal while a plan is underway to address leftover domestic and regional airlines, notably Tiger Airways and Regional Express. While the plan may placate the two big airline groupings in Australia, Sydney airport may face a shortfall of placement options for new carriers looking to offer their passengers onward domestic connections.

Sydney airport expects to formally begin stakeholder consulting with the aim of including the proposal in its 2014 master plan, which will be drafted in late 2013. Qantas and Virgin Australia, Sydney's two largest occupants based on movements and seats, have already given their support with the signing of a non-binding memorandum of understanding. The proposal will critically increase gates but not change slot restrictions, the airport's curfew or noise regulations.

Europe shut out as Jetstar uses 787s to open Asia and bring economics to existing network

Timing, they say, is everything. Jetstar's announcement that it will deploy the B787 Dreamliner on its Singapore-Auckland route comes as competitor Air New Zealand, the launch customer for the B787-9, is gearing up for a demonstration B787 to arrive in Auckland on 12-Nov-2011 for a high-profile visit. Competition is fair, but Jetstar's announcement could hardly be considered news since it has long been evident the budget off-shoot of Qantas will use the aircraft not to open new routes to Asia as previously planned but replace A330s on the carrier's few long-haul routes, which include Singapore-Auckland.

Virgin Australia responds to Qantas grounding; looking to bring in foreign aircraft domestically

Virgin Australia has quickly responded to the grounding of Qantas' mainline domestic and long-haul flights that went into affect at 5pm on 29-Oct-2011 in a bold move to make three of Qantas' unions settle ongoing wage and job security disputes.

In a nearly globally unprecedented occurrence, Virgin Australia is liaising with the Australian government to allow its alliance partners – Air New Zealand, Delta, Etihad and Singapore Airlines – to operate their foreign-registered aircraft domestically in Australia to help clear the impending backlog of Qantas customers. Qantas says it carrier 68,000 domestic and international passengers a day.