Air New Zealand’s Los Angeles to London flight has been on the watchlist for months and in a carefully co-ordinated operation the airline announced early today it would quit it next October.
The London route has been limping on for some time (the airline maintains it is profitable) but has none of the growth potential of where the airline will point its planes from Auckland at the same time — New York.
The Big Apple has been on the airline’s radar for about five years, while on the other side of the United States is a big part of its broader Pacific Rim strategy which former chief executive Christopher Luxon drove.
• Air New Zealand crew in mid-flight when job axing announcement made
• Watch: Inside Qantas’ historic New York-Sydney flight
• Premium – Grant Bradley: How big a catch is Greg Foran for Air New Zealand?
• Premium – Air New Zealand zeroing in on non-stop flights from Auckland to New York
It is believed that the call to axe London and go with New York was one of Luxon’s last calls.
The New York flight will be in the top five by distance and the airline feels confident to press go after its existing Boeing 787-9s have proven they have the legs and demand projections show the route will be economic.
It is “dipping the Dunlops” initially with just three flights a week but if it follows the pattern of its year-old Chicago flight, it could quickly step up frequency, especially with a flight of new Dreamliner aircraft due to join its fleet from 2022.
Not only does it give Kiwis the chance to fly directly to one of the United States’ most exciting cities (although it touches down in Newark, across the Hudson from Manhattan), it opens up much of the eastern seaboard.
Coming the other way, it opens up New Zealand to a huge market of American tourists who have a higher propensity to fly at the front of the plane and aircraft on the route have a premium skew.
Forsyth Barr analyst Andy Bowley says the New York flights are “absolutely consistent” with the airline’s strategy.
Likewise the decision to get out of the Los Angeles-London route, flights that are operated daily.
Since the beginning of the year when the airline renewed its focus on costs throughout the business the drums have been beating to quit the route.
The airline, and Bowley say it was a difficult decision.
“It is always tougher to exit a market than to enter it – there’s the (impact on) people, brand damage and it means they won’t be able to get back there even if they wanted to.”
There will be redundancy costs.
Up to 155 staff are affected and while some crew will be redeployed others will lose their jobs.
Air New Zealand sent senior executives to London and Los Angeles to inform senior staff from the weekend. It had back up crew on aircraft to support those who learned of the decision mid-flight and needed support.
While London-based crew are covered by the Unite union in Britain, E tū here says it will support affected staff and says it is not surprised by the decision.
The airline’s been flying to London for 37 years but demand patterns have changed and E tū acknowledges that.
Air New Zealand is facing intense competition from long-haul low-cost carriers across the Atlantic such as Norwegian Airlines and others such as Air France and the United States carriers have piled on capacity across The Pond, making it one of the most competitive routes in the world.
Flying through Los Angeles Airport is a notoriously difficult – even transit passengers need screening – and though that played a role in the decision to pull the pin, it wasn’t the game-breaker.
Air New Zealand flights to Europe also face competition in other directions.
The big Middle Eastern airlines, Emirates and Qatar, have about 40 per cent of traffic to and from Europe and each serve close to 40 European ports.
London has been a traditional gateway and exit point for Kiwis but no longer. It’s a costly airport to leave from with taxes much higher than its European neighbours.
Air New Zealand is also facing competition from state-owned mainland Chinese carriers which fly to a variety of European destinations.
Acting chief executive Jeff McDowall says less than seven per cent of all airline travellers between Auckland and London chose to fly via Los Angeles last year.
The non-stop flight to New York is also partly aimed at Australians who will have a one-stop connection to the US eastern seaboard.
The first booking on Air New Zealand’s Chicago service came from Australia and around 40 per cent of those flying to Buenos Aires via Auckland are Aussies. While Qantas is trialling its own non-stop services to New York, commercial operations won’t start until it has new planes if it does go ahead with Project Sunrise.”
Air New Zealand will use a 275-seat Dreamliner to New York and the economics of what is called a “long, skinny route” are delicate.
Changes to fuel prices mean the viability can swing quickly but from here the airline believes opening up a new frontier offers much more promise than sticking with one that’s had its day.