'Express' gets fast results

By CHRIS DANIELS aviation writer

Air NZ's "express" experiment - cutting fares, cutting costs and then hoping that more people fly - has been vindicated by figures showing a 20 per cent jump in domestic air travel.

The airline flew 636,000 people on its domestic network this September, up from 533,000 for the same month last year.

Such an increase in domestic traffic augurs well for last week's "express" expansion into transtasman travel.

Air NZ cut fares by an average of 20 per cent and added a move to one-way fares and less complicated conditions attached to tickets.

Some expressed scepticism that the domestic aviation market could be stimulated at the 20 per cent level needed for the project to avoid becoming a money-loser for the airline.

Domestic services account for about 19 per cent of its revenue, and have become its core profit-maker in recent years because of hard times on international routes.

Air NZ is now hoping that lessons learned from its successful domestic experiment - new planes, no payment of travel agent commissions, a smaller range of food and a push towards internet bookings - can be applied across the Tasman.

Online bookings for the Tasman Express service had grown to more than 30 per cent, up from less than 3 per cent previously. Air NZ has added 11 new weekly transtasman flights - seven from Christchurch, and four between Auckland and Melbourne.

By the end of the year, Air NZ will have four of its new Airbus A320 aircraft flying across the Tasman. These planes are up to 15 per cent cheaper to operate on a per-seat basis, says the airline.

It hopes to sell 120,000 one-way journeys across the Tasman by Christmas, a 10 per cent jump on the same period last year.

The latest September figures show that capacity increased by 5.6 per cent across the whole airline group.

One of the most important numbers for airlines is "revenue passenger kilometres" that measures actual paying customers, not just seats flown. This was up by 5.9 per cent on September last year, with a 20.5 per cent jump for its domestic network and a 3.9 per cent for international flights.

Load factors (the percentage of seats filled) rose slightly across the group, at 72.7 per cent.

But Air NZ does not expect the Tasman route will enjoy the same dramatic rise in business. This is largely because competitive pressure from Qantas and others had kept prices relatively lower.

Fares cuts on the domestic routes were prompted largely by a fear that a low-cost carrier, such as Australia's Virgin Blue, could start flying in New Zealand, offering prices far below those of Air NZ's.

Virgin, flying under the name Pacific Blue, is expected to announce its plans for New Zealand expansion in the next month or so. Since the Commerce Commission last week turned down the proposal by Air NZ and Qantas to join forces in an alliance, Virgin will have to work out its own arrangements for terminal access at Auckland Airport.

Air NZ had, as part of its application to the commission, offered to let Virgin use its Auckland check-in and ground-handling facilities.

Both Air NZ and Qantas are studying the commission's decision to see whether they have any chance of a successful appeal to the High Court.