Grant Bradley

Aviation, tourism and energy writer for the Business Herald

Air NZ, Singapore Airlines get into bed with new alliance

Air New Zealand and Singapore Airlines cuddle up with a new
alliance for Southeast Asia and beyond

The plan has been welcomed by the tourism industry and analysts, and the company's shares closed yesterday up 1c at $1.70, their highest in more than five years.
The plan has been welcomed by the tourism industry and analysts, and the company's shares closed yesterday up 1c at $1.70, their highest in more than five years.

Air New Zealand's return to Singapore and planned alliance with that country's airline firms up the growing relationship between the two carriers but they must first get the plan past competition authorities.

The plan has been welcomed by the tourism industry and analysts, and the company's shares closed yesterday up 1c at $1.70, their highest in more than five years.

The airlines will have to convince regulators that consumers will not be disadvantaged and, according to one analyst, the outcome of that process is difficult to predict.

Air New Zealand last flew to Singapore eight years ago and will now through code share and sales co-ordination get access to the Singaporean carrier's extensive Southeast Asia network - including aboard subsidiary SilkAir - and beyond to India, Africa, Britain and Europe.

The two airlines will also share revenue between New Zealand and Singapore.

The plan will involve Singapore Airlines putting an Airbus A380 on the route and Auckland Airport calculates 100,000 seats a year will be added between the two countries.

The move will cement the relationship of the Star Alliance member airlines which have also over the past two years built a stake approaching 50 per cent in Virgin Australia.

The plan announced yesterday needs the approval of the Ministry of Transport and Singapore's Competition Commission, which Forsyth Barr analyst Rob Mercer said was not always predictable.

In 2012 a code-share plan between Air Canada and Air New Zealand was blocked by the Australian competition authority.

"I don't think you can take anything as a fait accompli when it comes to route management around making sure competition is retained. It's a hurdle they have to overcome."

Mercer said the plan filled a gap in Air New Zealand's network and would be popular with high-yielding premium-class passengers.

The financial risk for Air New Zealand was confined to the Auckland-Singapore segment as travellers going further would fly with Singapore Airlines.

"It's not material by itself but the things that Air New Zealand is [doing] year in, year out is to try to make decisions that give them the best chance to maintain and improve profitability and the consumer options," he said.

Chris Byrne, an analyst at Craigs Investment Partners, said the move was a sensible one for Air New Zealand that was concentrating on the Pacific Rim.

"Singapore has always been a fairly popular route, Changi is very important and it's interesting to be improving the relationship with one of the strongest airlines in the region and in the world.

"It just makes sense," he said.

"You've got two strong home carriers creating demand from both ends rather than competing against each other."

While Air New Zealand will take over half of the flights currently operated by Singapore Airlines to this country, the Singaporean carrier will also upgrade its services, moving towards flying its A380 on a seasonal basis to this country for the first time.

Air New Zealand says the deal could boost capacity between New Zealand and Singapore by up to 30 per cent year-round over time.

Air New Zealand last flew to Singapore in 2006 but struggled to make money on the route.

The airline has been chasing partnerships with others, rather than operating alone as a small carrier flying into big markets where rivals have a home-ground advantage with marketing and sales distribution power and favourable treatment from airports.

Singapore Airlines has flown here since 1976, with up to 19 round trips a week to Auckland and Christchurch. But like many other overseas carriers flying to this country, it will have had difficulty making money at times.

It had an unhappy experience as a stakeholder in Air New Zealand around the time of its near collapse in 2001, losing more than $200 million on its four-year investment.

Air New Zealand chief executive Christopher Luxon was in Singapore for yesterday's announcement and said his airline was on a positive growth path in the Pacific Rim.

"An alliance with Singapore Airlines clearly fits our business objectives of working with the right partners in the right markets to deliver seamless customer journeys," he said.

Luxon, who took over as chief executive a year ago, sits on the Star Alliance board with Singapore's head, Goh Choon Phong, who is also relatively new in the top job.

Goh said the alliance was another example of his airline's commitment to the southwest Pacific.

"This is a genuine win-win partnership enabling Singapore Airlines and Air New Zealand to work together to provide more flight frequency and enhanced travel options for our customers."

Air New Zealand last year started a revenue-sharing deal with Cathay Pacific on the carriers' Auckland-Hong Kong route.


Getting into bed

• New daily Air NZ Auckland-Singapore service planned to replace and expand Singapore Airlines' five-times-a-week evening service using refitted Boeing 777-200 aircraft.

• Singapore Airlines progressively introduces an A380 to its Auckland-Singapore daytime service.

• Singapore retains its daily service to Christchurch using its refitted 777-200 aircraft.

- NZ Herald

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