Editorial: Air NZ flying high but must heed flak on regional fares

Opinion

These are momentous times for Air New Zealand. Its extremely good health was confirmed yesterday by the announcement of a 45 per cent rise in annual after-tax profit to $262 million, the third consecutive year of strong earnings. It also stands on the verge of a new era as the first of its Boeing 787-9 Dreamliners enters service and astute alliances with other airlines offer new frontiers. The near collapse of the national airline 13 years ago now seems the most distant of memories. Combine that with woes afflicting many other airlines, including Qantas, and Air New Zealand is a success story worth celebrating.

The airline's sharply increased profit in the latest June year owes much to continued strong leadership, a focus on cost management, and improved fuel efficiency. These will be integral to continued growth. But Air New Zealand now possesses even more ammunition. The airline's capacity will grow substantially as new aircraft arrive. Further, a code-sharing alliance with Singapore Airlines, which has just received regulatory approval, will allow it to build its business in Southeast Asia after a period of concentration further north. This will complement other key alliances with Cathay Pacific and Virgin Australia.

Air New Zealand will also benefit from the arrival of its 10 Dreamliners. Their cutting-edge technology offers a further 20 per cent increase in fuel efficiency, as well as maintenance savings. An opportunity to open up new destinations comes with them. For passengers, there will be the advantages of more spacious economy class seating, reduced noise, and a less clammy atmosphere.

Air New Zealand talks of the Dreamliner as a game-changer. The same, of course, was very much true of the Boeing 747s, which the Dreamliner and additional Boeing 777s will supplant. The last flight of an Air New Zealand jumbo jet will be to San Francisco on September 10, returning to Auckland two days later. The 747's retirement, after 33 years of service, should not pass without acknowledgment of its pivotal role in the airline's growth and the development of tourism in this country.

The aircraft joined Air New Zealand's ranks, replacing the DC-10, just two years after the Erebus disaster. The airline's stocks were at an all-time low. The 747 helped to transform its psyche and, at the same time, transformed international travel. The airline's profits benefited from the 747's fuel per person ratio and much-improved range. Passengers found they could travel long distances far more easily and in far less time. This was hugely significant for a country as remote as New Zealand.

Next year marks the 75th anniversary of Air New Zealand. In all probability, it has never been in better shape operationally. But its history reflects the fact that an unwelcome surprise is usually just around the corner in the airline industry. Air New Zealand has been favoured by its relatively small size and ability to be fleet of foot. And unlike Qantas, it is not burdened by unreasonable expectations in flying the national flag. Nevertheless, it is no less susceptible to some potential problems. These could include rising fuel prices, a sharp fall in the New Zealand dollar, or global upheaval.

Only recently, another problem appeared seemingly out of nowhere. An airline that had prided itself on its customer relations found the plight of stranded passengers in Hawaii attracting international attention. Such occurrences can have a significant impact on an airline's reputation. For that very reason, Air New Zealand cannot now afford to ignore the Prime Minister's criticism of its expensive regional airfares. To do so would throw a cloud over a bright future.