Posted on: 11 November 2014 by Mark Howells
Air New Zealand has unveiled the outcome of a comprehensive review of its regional aircraft operations aimed at delivering sustainable air services, as a result of which it has decided to wind down its 19 seat Beech 1900D operations and move to 50-seat aircraft on routes where sufficient demand exists.
The airline’s chief executive officer Christopher Luxon reported that since the beginning of 2014 the airline has had a team looking at how to address the challenges of the poor operating economics of the 19-seat fleet and also making use of the economies of scale available from its 50 and 68 seat fleets.
“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,” Luxon explained. “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.”
Luxon added that as 2014 unfolded, it also became clear that on some regional routes demand for seats was strengthening. “Air New Zealand has already begun putting more seat capacity into those markets and is [now] announcing an acceleration of that process with an additional $100 million investment in four new 68-seat [ATR] aircraft,” he stated.
Thus Air New Zealand will move all regional flying to either 50- or 68-seat aircraft and exit its 19-seat fleet by August 2016. “Our average regional airfare has fallen by 2% over the past five years and this announcement will keep further downward pressure on regional airfares,” Luxon remarked. “On the 13 routes which will move from 19-seat aircraft to more cost effective 50-seat aircraft, we expect to deliver a 15% average fare reduction to our customers. This is good news for 12 towns: Kerikeri, Whangarei, Tauranga, Hamilton, Rotorua, Gisborne, Taupo, Wanganui, Palmerston North, Blenheim, Hokitika and Timaru. Each will progressively move to 50-seat aircraft and benefit from fare reductions.”
There are a small number of regional routes where demand cannot sustain 50-seaters aircraft. These will be suspended from April 2015. The routes are: Kaitaia–Auckland; Whakatane–Auckland; Whangarei–Wellington; Taupo–Wellington; Westport–Wellington and Palmerston North–Nelson. Hamilton–Auckland will 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.
“Eagle Airways management, staff and unions will now begin a process of determining the future of the business. The airline has 232 employees and there are good redeployment opportunities across a rapidly growing Air New Zealand Group,” said Luxon.