Codeshare agreement brings significant benefits
“The Tasman is a fiercely contested market,” said Rob Fyfe, Chief Executive Officer of Air New Zealand. “The number of seats on sale is greater than the number of passengers carried; in fact the equivalent of 11 empty A320 aircraft make two return trips per day. “
“To continue such over capacity in the present environment of high fuel prices would not only be uneconomic, it would be financially and environmentally irresponsible.”
“A codeshare agreement will allow the airlines to reduce cost by removing some surplus capacity and utilising aircraft more efficiently, while increasing the number of flights available to each airline’s customers.”
Mr Fyfe said that while the proposed codeshare arrangements with Qantas and recent initiatives designed to remove costs from Tasman operations would be positive for Air New Zealand, the company would still be well short of achieving adequate returns on its substantial fleet investment. Air New Zealand currently has almost a billion dollars invested in aircraft on the Tasman.
”Once the proposed codeshare arrangements with Qantas become effective, the market will continue to be highly competitive,” said Mr Fyfe.
“The reality is that both Air New Zealand and Qantas continue to compete against a significant number of other airlines on the Tasman. Both airlines would also remain vigorous competitors in marketing and distribution.”
Some facts:
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Market load factor declined from 75% to 70% between 2003 and 2005
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The equivalent of 11 empty A320 aircraft make two return trips per day
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Between 2003 and 2005 capacity growth of 39%, passenger growth of only 31%
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Air New Zealand has utilised low cost based airline Freedom Air, introduced Tasman Express and implemented a strategy to reduce operating costs.
- Qantas has launched Jetstar and a cost reduction programme.
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Neither Air New Zealand nor Qantas are meeting their target return on capital.
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Neither airline can viably extract capacity alone as it provides the opportunity for the other to expand and gain a broader network advantage.
Graham Muldoon
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