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Air New Zealand Doesn't Miss First Class

Arguably the first airline to axe first class, it hasn't looked back.
COMMENT, Business Trends

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Despite earnings being lower, Air New Zealand has benefited by pushing down costs and has experienced a revival of business traffic at the expense of regional rivals like Qantas and VAustralia.

The airline was one of the first to remove first class cabins, despite doing so, Air New Zealand managed to lower its unit costs and built on its business and premium economy classes through increases in leisure traffic that has become very sensitive to prices given the recent global financial downturn.

The airline has opted to use smaller, longer range jets which are much easier to fill during any recessionary period in contrast to bigger jets, thereby reducing the exposure to yield attrition and with the retirement of the older 747-400 fleet, Air New Zealand can expect a further cut in its fuel and maintenance bills.

Bookings have been very strong and there is every possibility that Air New Zealand reinstates capacity to match increased demand while it awaits its new 777-300ERs due next year and 787-9’s, the former which will debut its new Sky Couch product.

Closer to home, the departure of Pacific Blue from New Zealand has meant that Air New Zealand can now look to open up a big front on domestic and intra-Australian traffic with more vigour, ultimately lower unit costs through increased frequencies. While the future is still uncertain, Air New Zealand is at least shielded from reliance on high yield fares – in their absence, it’s not hard to see why some legacy airlines will continue to struggle back to profitability.

Air New Zealand already has half that challenge overcome and as traffic continues to grow, so too will its revenues.

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