Air New Zealand ready to do battle with gulf carriers

When fuel was expensive, ultra-long-haul flying was a losing game. But with oil at its lowest level for years, New Zealand is a new target for U.S., Middle Eastern and Asian airlines.

March 1st 2016

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New Zealand may be small in population and remote in destination, but it is becoming a hot property in the airline world. Read More » In January, Emirates Airline announced it would be flying non-stop between Dubai and Auckland from June and Qatar Airways has hinted strongly it will follow suit from Doha.

In Asia, Malaysia’s AirAsia X plans to extend its Kuala Lumpur-Gold Coast Australia service to Auckland, with the budget carrier’s chief executive, Benyamin Ismail, saying if the route is successful his airline could soon return to Christchurch. The route was dropped in 2012 after the city suffered a devastating earthquake in February 2011. He added the country’s capital, Wellington, was being considered as an addition to AirAsia X’s network.

These new flights followed an American Airlines announcement that it would launch Los Angeles-Auckland services in June and a decision by Singapore Airlines (SIA) to add a Singapore-Canberra-Wellington route to its network later this year. The SIA services will provide direct flights between the two capital cities of Australia and Wellington for the first time.

It all adds up to a dramatic increase in competition for local carrier, Air New Zealand (Air NZ), one of the world’s best performing airlines. But the wave of new capacity is not keeping the airline’s CEO, Christopher Luxon, awake at night.

“Air New Zealand is performing really well,” he told Orient Aviation. “Our customer satisfaction scores, brand health and corporate reputation are the best they have been. And as we have indicated to the market, we are on track for a strong interim result later this month. At press time, the airline reported a NZ$338 (US$226 million) interim profit compared with NZ$133 million a year ago.

“Reported moves by the Middle Easteran carriers to start ultra-long haul flying to New Zealand come as no surprise given the lower fuel cost environment that allows us to take advantage of existing and new opportunities,” said Luxon.

He has every right to be confident. Air NZ has been in the black for 13 consecutive years and reported a record net profit of US$216 million in the twelve months to June 30, 2015. The strong financial results mean Luxon is sure the carrier is very well positioned to confront new competitive challenges. As he has put it, Air New Zealand is “fitter than it’s ever been and is in a stronger financial position to fight several battles at the same time”.

Nevertheless, Emirates’ non-stop arrival inAuckland - it serves New Zealand through Australia – will present some challenges for Air NZ’s marketing executives. Presently, New Zealanders have only two one stop options to Europe. They can fly to Los Angeles on their home carrier and then onto Europe or they can go through Hong Kong and onwards to Europe with code share partner, Cathay Pacific Airways. A third option is Australia-Asia-Europe.

Emirates and Qatar will be able to offer one-stop flights from Auckland to their hubs and onto dozens of destinations across Europe. Emirates alone has 38 European destinations in its network. The Emirates flights will be operated with B777-200LRs, with an estimated flight time of just under 16 hours from Dubai to New Zealand and 17 hours, 15 minutes in the other direction.

“Having just one stop on the long haul flight to New Zealand will make the journey quicker and more comfortable,” said His Highness Sheikh Ahmed bin Saeed Al Maktoum, chairman and chief executive of the Emirates Airline Group. “This will be a boon to many business people, tourists, expatriate New Zealanders and other travellers in Europe, parts of Africa and the Middle East.”

With the introduction of the non-stop service, Emirates will be flying more than 2,000 seats a day in each direction on its New Zealand services.

The new interest in New Zealand is a result of a wave of ultra-long haul routes that are being launched as the fuel price has plummeted. When oil prices rose above US$100 a barrel and continued to climb, airlines eliminated uneconomic ultra long haul destinations from their networks.

That has all changed. Reports that Qatar could launch a record-breaking flight to Auckland emerged at the Bahrain air show, when Qatar Airways CEO, Akbar Al Baker, said the airline planned to launch ultra-long haul flights, not only to Auckland but to Chile’s capital, Santiago.

The latter would be a 9,034 mile (14,454.4 km) journey of 18 hours and 34 minutes. The longest flight in the world is Qantas Airways’ Sydney-Dallas Fort Worth service of 8,578 miles (13,724.8 km) and 16 hours and 55 minutes in duration.

As well, Singapore Airlines has shown interest in resuming direct flights between New York and Singapore in 2018, which at 9,535 miles (15,256 km) and a journey time of 18 hours 50 minutes, held the record for the longest route in the world until it was discontinued in 2013.

There is every chance some airlines will look at even longer flights. Emirates’ president, Sir Tim Clark, has talked about the possibility of a 20-hour flight that would link Sydney directly with Rome.

Industry insiders also have suggested the Gulf carriers may extend their direct services to New Zealand and onto the U.S. West Coast if they receive approval from the relevant regulatory authorities.

Air NZ is not letting the grass grow under its feet as competitors move into their traditional turf. With its six new B787-9s, eight B777-200ERs and seven B777-300ERs, it launched services to Houston and Buenos Aires in December and is considering more destinations for its long haul network.