Airline says timing is right to take on risk including resuming daily Singapore flights.

Air New Zealand will tomorrow resume flights to Singapore - its biggest long-haul move in a decade and one which marks the start of an aggressive growth phase.

The airline says it is "converting talk about growth into real growth" with the daily service to Singapore due to take off in the early hours after pulling its planes from the route eight years ago.

Air New Zealand will also open up a new route later this year with three-times-a-week services to Argentina's capital city Buenos Aires.

The airline's growth aspirations in long-haul markets have been constrained by years of delays in getting its new Dreamliners, soft demand in the wake of the global financial crisis, high fuel prices and until the past year, subdued group profit.


During the past 10 years the airline has withdrawn from some routes - notably Auckland-Singapore and Hong Kong-London - and this had been offset by incremental increases in capacity in others, but chief sales and commercial director Cam Wallace said overall growth in capacity had averaged just half a per cent a year in that time.

But pre-tax earnings leaped 40 per cent in the last financial year and the airline has upgraded its profit outlook this financial year, following strong bookings and falling fuel prices.

The daily Singapore flights using a newly upgraded Boeing 777-200 aircraft was a big strategic move for Air New Zealand.

"It's quite a significant and material step for us," Wallace said.

"The organisation now has the financial flexibility to take some calculated risks and convert some opportunities."

The airline has entered a revenue sharing deal with Star Alliance partner Singapore Airlines, which builds on a code-share deal between the carriers.

Planning began more than a year ago for the deal, which had to satisfy regulators in both countries that competition would not be adversely affected. The airlines were granted permission to run the alliance for four years.

Wallace said most New Zealanders would travel beyond Singapore on Singapore Airlines' long-haul network to Europe, or use its short to medium-haul subsidiary Silk Air to points in Asia.


This could result in lower fares to Europe, he said.

"This will provide us the opportunity to sell more aggressive fares into Europe because we'll have an incremental connecting hub.

"This will be very attractive for consumers because of the width and breadth of the offering."

Revenue sharing deals allow airlines to sell into each other's planes. The money goes into a consolidated fund and is shared at the end of a set period according to the number and type of seat sold on a pro-rata basis. Each airline is responsible for its own operating costs.

Air New Zealand has established an office in Singapore.

Wallace said the alliance was partly in response to the maturing alliance between Qantas and Emirates which was taking New Zealand passengers to Europe via Australia and Dubai.

"There's no doubt that we want to be as competitive as we possibly can against the QF-EK alliance and part of that is convincing customers that there's a more efficient and effective transfer point with a high quality carrier."

He said it was difficult to calculate how many potential passengers from New Zealand were travelling on the rival alliance.

Shifting up a gear to high growth in capacity of 5 per cent a year required a different way of thinking. "As we go and add more complex long-haul routes we expect it to take more time for us to build our brand, our proposition and come up with long-term returns."

Expansion would mean a further deepening of ties with the travel industry.

The airline has shifted tactics in the past two years to work more closely with travel agents to sell seats, particularly on long-haul routes.

House of Travel commercial director Brent Thomas said his firm was looking at double-digit growth in bookings on long-haul routes, which would be boosted by Air New Zealand's plans.

The Singapore deal would be attractive to Kiwis who would be able to fly on Singapore Airlines - which has a similar product to Air New Zealand - to one city in Europe and depart from another destination.