Air NZ confident of holding its ground

By DANIEL RIORDAN

Air New Zealand chief executive Gary Toomey is confident the airline will have between $600 million and $1 billion in cash by the end of this financial year (June 30) to help revamp its fleet, but admits it needs to sort out its balance sheet and reduce its gearing.

Investment bank Salomon Smith Barney is advising the company on its funding options, and is expected to present the company's board with at least five options in July. These are expected to include buying aircraft on financing leases, short-term leases and mezzanine finance.

Air New Zealand has vowed to fight tooth and nail for the extra market share it has grabbed since Qantas NZ's demise, and has bolstered its full-service arsenal ahead of Qantas Airways' entry next month into the domestic market.

Among initiatives announced by Mr Toomey yesterday were in-flight video and the upgrade of lounge facilities. The airline will also offer from next year a self-service touch screen check-in facility at airports that will eliminate the need for visiting the counter. A daily weekday flight between Auckland and Dunedin is also being launched before the end of November.

The airline will spend $4 million promoting the service enhancements, which appear focused in particular on high-yield business travellers.

Last week, Air NZ subsidiary Ansett launched a $38 million marketing campaign in Australia, designed to win back some of the market share it had lost in the past 12-18 months to Qantas, Virgin Blue and the now defunct Impulse.

The New Zealand market is much smaller than Australia's, but it has been highly profitable to Air NZ.

Mr Toomey said that before Qantas NZ went into receivership, Air NZ had 65 to 70 per cent of the market, and had since increased that. .

Load factors on Air NZ domestic flights had risen from 65 to 75 per cent before the demise of Qantas NZ to 85 per cent - effectively full loads. Loadings for Freedom Air, the company's budget subsidiary now flying domestically as well as transtasman, were about 65 per cent and sure to rise as the airline's presence became more widely known.

Freedom had taken 11,000 bookings since it launched domestically a little over a week ago, and there had been little cannibalisation of its parent's full-service market.

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