Air NZ ends feud, expands networks

JOSH MARTIN
Last updated 07:52 17/01/2014

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Air New Zealand has buried the hatchet with one-time bitter rival Singapore Airlines as the carriers form a deep alliance that will significantly strengthen the national carrier's reach into South East Asia and its fast-growing tourism market.

Under the agreement the carriers will increase seat capacity by up to 30 per cent between Auckland and Singapore.

For Air New Zealand the alliance marks a return to a route it was forced to abandon in 2006 due to heavy losses.

Air New Zealand will take over five services operated by Singapore Airlines using upgraded Boeing 777-200ERs and add two more flights per week. Singapore will progressively replace its remaining daily 777-300ER services with A380 superjumbos.

The airlines will share all revenue on the route, on which Qantas-owned budget airline Jetstar is the only other competitor.

The alliance will provide Air New Zealand passengers with access to Singapore Airline's extensive South East Asian network and beyond to the UK, Europe and Africa, as well as the network of its regional subsidiary SilkAir. Singapore Airlines will in turn gain access to Air New Zealand's domestic network and some international destinations.

The alliance was expected to take effect by the end of the year subject to approval from the New Zealand government and Singapore's competition regulator.

Singapore Airlines' daily service to Christchurch was not included in the deal but the airline's general manager for New Zealand Edwin Chiang said further fights would probably be added to the city this year.

Tourism New Zealand, Auckland Airport and other industry players praised the new alliance, which they said would boost inbound leisure tourism thanks to Singapore Airline's extensive global network.

Singapore Airline's ultra first class suites onboard its Airbus A380's could support the Government push to encourage more high net worth tourists.

"There's no doubt that the use of the three-cabin Airbus A380 on flights to New Zealand will meet the needs of higher value visitors who prefer to travel First Class on long haul sectors and will support the positioning of New Zealand as a premium destination," Tourism NZ chief executive Kevin Bowler said.

House of Travel retail director Brent Thomas said both airlines shared the same commitment to premium service, meals and entertainment, "so are a natural fit.".

Thomas said the added capacity should mean competitive prices on routes to South-East Asia and Europe but was unlikely to reduce fares on the Auckland to Singapore route.

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The deal forms an important part of Air New Zealand's "Go Beyond" strategy to grow its Pacific Rim network through partnerships with other airlines.

Air New Zealand chief executive Christopher Luxon said: "Air New Zealand is on a positive growth trajectory with a clear focus on Pacific Rim destinations.

"An alliance with Singapore Airlines clearly fits our business objectives of working with the right partners in the right markets to deliver seamless customer journeys."

Luxon said routes that offered long- term sustainable growth and profitability would largely come from working with former rivals in mutually beneficial ways.

"The key thing is finding partners versus flying into an airline's hub or home city and announcing 'Hey guys we're here, you lucky people, jump on board' ", Luxon said.

Air New Zealand entered into a similar alliance with Hong Kong-based Cathay Pacific last year with the aim of gaining greater access to the North Asian market, in particularly China.

Forsyth Barr head of private wealth research Rob Mercer said after an "arms-length arrangement" relations have thawed and Air New Zealand was smart enough to know it could benefit from greater access to another Asian transport hub.

"Air New Zealand gets reach all throughout South East Asia and further into Europe from this agreement, without having to commit aircraft to those routes where it has no core competency," Mercer said.

Air New Zealand and Singapore Airlines, both Star Alliance members, previously had a codeshare agreement between 1998 and 2002. Singapore Airlines for a time owned around 25 per cent of the national carrier, before it had to be bailed out by the Government in 2001.

Both airlines are also the two biggest shareholders in Australia's second largest airline, Virgin Australia.

KEY POINTS

1. Air New Zealand and Singapore Airlines will form an alliance on the Auckland to Singapore route

2. Each will operate a daily service and share revenue on the route.

4.Singapore will progressively introduce the Airbus A380 on its Auckland services.

- Fairfax Media

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