12 Nov 2014

Winners, losers in Air NZ revamp

11:30 am on 12 November 2014

Air New Zealand will no longer fly to Westport, Kaitaia and Whakatane following a revamp of its regional air services, chief executive Christopher Luxon announced today.

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Photo: RNZ

The national carrier had been conducting a review of its regional operations since the start of this year, and specifically looked at the poor operating economics of its 19-seat fleet.

"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," Mr Luxon said.

"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."

The company was therefore stopping, from next April, flights from Kaitaia to Auckland, Whakatane to Auckland, Whangarei to Wellington, Taupo to Wellington, Westport to Wellington and Palmerston North to Nelson. Hamilton to Auckland would 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 said.

The company was also scrapping some flights to Taupo, Palmerston North, Nelson, Hamilton and Whangarei.

Eagle Airways has 232 employees and Mr Luxon said he acknowledged the move was disappointing for them. However, there were good redeployment opportunities across Air NZ, he said.

The winners in the announcement were 12 centres currently serviced by 19-seat aircraft which would gradually move to 50 or 68-seat aircraft, with fares for those flights falling an average of 15 percent.

Those centres were Timaru, Hokitika, Blenheim, Kerikeri, Whangarei, Tauranga, Hamilton, Rotorua, Gisborne, Taupo, Wanganui and Palmerston North, Mr Luxon said.

"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."

Air New Zealand had been criticised for its high last-minute fares on regional routes and, in response to that, was introducing last-minute fares of $169 for a single sector or $249 for two or more sectors.

Those fares would be available for people with a close family bereavement or critical medical situation from 20 November, and for last-minute travel on some flights from 1 February.

Whakatane Mayor Tony Bonne said the company's claim that it was a national airline, reaching the whole of provincial New Zealand was no longer true with today's announcement.

He said that cutting of flights to his area was proof the airline was pulling out of provincial New Zealand.

Mr Bonne said it was a major blow and came without any consultation.

Regional airline operators will struggle to replace Air New Zealand's services according to analyst at Forsyth Barr Andy Bowley.

He said the costs of flying to small towns are great and another operator would be unlikely to have the regular scheduling and capacity of Air New Zealand on those routes.

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