Air New Zealand Prepares for New Competition from Qantas and Delta
Air New Zealand had the nonstop market between Auckland and New York all to itself for all of five months last year. Then, as a precursor to its own nonstop flights from Sydney, Qantas Airways announced plans to join it on the route amid a surge in longhaul travel demand in both Australia and New Zealand.
The competition, however, does not appear to concern Air New Zealand CEO Greg Foran. When asked in an interview earlier in January if the new Qantas route worried him, his response was: “Not particularly.” The same applied to Qantas partner American Airlines’ new nonstop to Auckland from Dallas-Fort Worth that began in October.
“We’re expecting that,” Foran said. “We’re used to competition. It’s our home base. We’ll protect that and do what we need to, but I think it’s fair to say that we will see some new entrants come in.”
It’s good that Air New Zealand is unconcerned and prepared for new competition, particularly from North America. Delta Air Lines President Glen Hauenstein told staff last week that the carrier will launch a new Auckland nonstop from Los Angeles later this year as part of the recovery of its Asia-Pacific business; the route would mark the first time in the Atlanta-based carrier’s history that it has served New Zealand.
The competitive changes are standard for the airline industry. Auckland Airport Chairman Patrick Strange noted in October that there is “a lot more passenger demand than there [are] operating aircraft to fly them.” And, when demand outstrips capacity in an industry that abhors such an imbalance, airlines will add flights. That is, airlines that have both the aircraft and staff, which are no small orders in this resource-strained recovery.
New Zealand is in the midst of a strong international travel rebound. The country only fully reopened its borders in August after more than two years of pandemic-related closures and restrictions. The response has been robust pent-up travel demand. That prompted Air New Zealand late last year to raise its profit outlook for the six months ending in December by as much as NZ$95 million ($61 million) to NZ$295-325 million.
“We’ve rebounded strongly,” Foran said, adding that this is true across its geographic segments, from domestic New Zealand to Australia and longhaul. “Customers are out in numbers, and they’re very keen to travel.”
This is not to say that Air New Zealand does not see potential alarm bells. High inflation and the uncertain economic outlook are two things Foran is following closely. His response is a “sensible” capacity recovery and financial outlook for the airline with the belief that there will be some negative impact on disposable incomes as inflation hits consumers’ cheque books.
Air New Zealand flew about 74 percent of its 2019 system capacity in December, according to Diio by Cirium schedules. And while that does not stand out in a world where many global airlines neared pre-pandemic levels at year end, it was remarkable: Air New Zealand nearly quadrupled in size from January through December. That’s a significant feat for an airline at any time, but especially during a year marred by staffing shortages and other operational disruptions.
“I wouldn’t say that we’re operating like a Swiss watch by any means,” Foran said. “We are not quite as smooth and seamless as we’d like to be but I think everyone has appreciated that when an industry has gone through the type of events that we have, it takes a while to build the muscle back.”
For 2023, Air New Zealand plans to boost domestic New Zealand capacity above 2019 levels, and fully recover its Australia and Pacific Islands capacity by the middle of the year, he said. Longhaul is roughly 75 percent recovered and Foran said the airline is “pretty comfortable” where that stands currently.
In addition to the new New York nonstop that Foran said is meeting expectations, Air New Zealand has resumed all of its pre-pandemic U.S. routes. This includes those to the traditional gateways of Honolulu and Los Angeles, as well as joint venture partner United Airlines’ hubs in Chicago, Houston, and San Francisco. United also operates an Auckland-San Francisco nonstop.
When asked about future growth, Foran said there was not one particular market he felt was underserved from New Zealand. That said, he is watching “how China will play out.” China only reopened to international visitors on January 8.
Air New Zealand never suspended its flights to Shanghai Pudong during the pandemic. It continued to operate them primarily to carry cargo. The aim now is to gradually return to daily service from Auckland in line with demand, Foran said.
The airline’s recovery is also limited by its fleet decisions during Covid. Air New Zealand retired its eight Boeing 777-200s in 2020 as it looked to cut costs early in the pandemic. Those planes will be replaced by eight new Boeing 787s that are on order with the first due in late 2024. The airline has the choice of either the 787-9 or larger -10 for those aircraft, Foran said, adding that it has not “made a decision” on how many of which type to take.
Air New Zealand sees the 787-9 as its preferred aircraft for longer-haul routes, like to Chicago, Houston, and New York, Foran said. The -10 could be ideal for busier flights to Los Angeles. All of the 787s on order will arrive with a higher maximum takeoff weight than earlier models that allows for more range — an important addition for an airline that has its home base in one of the more remote major cities in the world — he said.
Speaking of fleet, Foran also sees a potential opportunity for more Airbus A321neos and ATR 72 turboprops in Air New Zealand’s fleet. The former, which have performed well on domestic routes, could be used to open more points in Australia or add seats to Australia and the Pacific Islands.
Air New Zealand is also in the early stages of a zero-emissions aircraft procurement program to replace its fleet of 23 De Havilland Dash 8-Q300 turboprops from around 2030. The airline is working with all-electric aircraft developers Beta and Eviation, hydrogen fuel cell developer Cranfield Aerospace, and hybrid-electric developer VoltAero on a demonstrator plane that can fly revenue passengers by 2026. From these, and potentially other developers, Air New Zealand plans to select a Q300 replacement, Foran said.
Updated to reflect Patrick Strange’s title as chairman of the Auckland Airport, not CEO.Subscribe Now to Airline Weekly