Air NZ overhauls domestic fares

04:43, Jun 11 2014

Air New Zealand's revamped domestic fares are good news for business travellers, and could hurt rival Jetstar's efforts to tackle the lucrative market.

The national carrier is making cheap seat-only fares available throughout the booking process, sparing last-minute customers from having to fork out for unwanted add-ons.

From June 24, travellers will be able to buy the bare-bones option, saving an estimated $50 compared with current prices.

As well as the standard carry-on luggage and tea and coffee, the entry-level fare will also earn Airpoints Dollars and status points.

The next tier, Seat+Bag, costs an extra $10 but allows passengers a piece of checked luggage.

While the Seat and Seat+Bag will replace existing Grabaseat fares, the airline said the Grabaseat website would continue to offer cheap flights on a "surprise and delight basis".


Air New Zealand's Smart Saver fares have been replaced by Flexitime, which is $20 more expensive than Seat+Bag, but allows customers to change their flight to another service on the same day, free of charge.

The existing Flexiplus premium option has been beefed up, giving customers two pieces of checked luggage, seat selection and higher earn rates on Airpoints Dollars and status points.

Flexiplus costs $20 more than Flexitime and is fully refundable, allowing travellers to change the day, time, destination or origin of their flight without paying a fee.

Air New Zealand said in a note to customers that it had introduced the new fare structure in response to feedback.

"We asked Kiwis what they wanted when travelling around the country," it said.

"The same answers came up again and again - flexibility, affordability and choice."

House of Travel commercial director Brent Thomas said the changes were good news for consumers and the airline.

"It's about filling the whole plane. It's the last few seats that make the profit," he said.

"Even if those last few seats are sold at a lower price, it all helps their revenue and gives them a yield advantage over where they were previously."

Thomas said the changes would be especially well received by business customers, who booked closer to the flight date than holidaymakers or general travellers.

Businesspeople did a lot of day trips and often needed only a carry-on bag even if they were staying overnight, he said.

Andrew Dale, chief executive of corporate travel agency APX, said that while corporate travellers would embrace the change quickly, it was "a bit of a gamble" for Air New Zealand.

"They'll be watching very closely which of these four types of products are the most popular," he said.

"This is the first time you can really differentiate the price you pay and the service you receive."

Jetstar has struggled to attract business commuters, and Air New Zealand's shake-up is likely to make it harder to do so.

The low-cost carrier recently retimed its schedule and added the Qantas Frequent Flyer programme in an attempt to make itself more appealing to the lucrative market.

But while it has recently trumpeted its improved reliability record, its history of flight delays and cancellations has left business travellers cold.

One travel agent said recently that companies went out of their way to avoid flying Jetstar, even if they had a policy to take the lowest fare available.

- This story's headline has been corrected