Air NZ has a new friend
A report in NZ’s Sunday Star Times says that with Qantas cashing in its Air New Zealand chips on Tuesday, ending the five year association that dreamt of trans-Tasman co-operation, Air New Zealand is courting new friends.
Derek Sadubin, chief operating officer at the Centre for Asia Pacific Aviation said that Air NZ’s performance had been enhanced by “forward thinking and fleet upgrades” and “It’s leading the pack in yield growth and that’s translated to good earnings and a buoyant share price.”
Air NZ, however, is not done yet and as Sadubin commented, “Goodbye Qantas, hello other partners, with Air China appearing to be Air New Zealand’s new best friend, by the two airlines announcing a code share deal on flights linking New Zealand, China and Australia and Air China joining the Star Alliance network in December.
The deal signifies the importance of China to Air NZ. Services to Hong Kong and Shanghai have been boosted on strong demand, and the code share will help link the long haul flights with regional Chinese destinations.
Air NZ is one of the biggest users of code share arrangements among international airlines – no doubt a factor of its geography – but the deals can be a weakness when it comes to implementing the airline’s strategy of delivering high quality customer service from airport to holiday. After all, Air NZ has no control over the customer experience on partner airlines.
Analyst Rob Mercer at Forsyth Barr sees the code shares as useful, but unreliable as long-term earnings drivers. “You never want to put great value on joint ventures,” he said. “It’s hard to keep these things working on an equal basis.”
Nevertheless, Air NZ’s investment in aircraft had put it ahead of the pack and it was now the preferred airline for many business travellers, he said.
With more new aircraft still to be delivered, and the online strategy gaining widespread customer acceptance, Mercer believes we haven’t seen the best of Air NZ quite yet.
“These guys have done a great job of repositioning,” he said. “So we still like it. We’ve got a buy on the stock and a valuation north of $3.”
Given the current economic conditions, investors may be rewarded for sticking with Air NZ a while yet.
Report by The Mole and the Sunday Star Times
John Alwyn-Jones
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