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Domestic air travel's big changes

By Graeme Kennedy

Friday 23rd May 2003

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Domestic and regional air travel is undergoing huge change, with the overwhelming success of Air New Zealand's low-cost fewer-frills Express Class and the October 26 launch of the carrier's new Airbus A320 services on the Tasman.

Passenger traffic has increased 18%, load factors have risen six points to 75% and market share has peaked at 77%, up from 71% since Express Class was introduced on November 1, with domestic route capacity up 10%, a performance chief operating officer Andrew Miller describes as "very healthy."

"We listened to the market," Mr Miller said. "Customers were demanding reduced service such as meals in exchange for lower fares and we cut prices 30% on the trunks and 20% on provincials, simplified the fare structure and removed restrictions.

"Short-haul travel is now a commodity product and travellers wanted it cheaper ­ the demand was from the leisure sector, which buys on price, and on subsidiaries such as Eagle Air Whangarei people got out of their cars and into our aircraft to go to Auckland for $60."

Air New Zealand took out the business class cabins in its domestic Boeing 737-300s to provide 12% more economy seats and has recently responded to criticism it had too few of the cheapest seats by increasing availability from 10% on each aircraft to 25%.

While the new model was driven by leisure demand, Air New Zealand retained its business travellers with multimillion-dollar investments in lounges with meals and services to compensate for the reduced in-flight frills ­ last week Forbes magazine listed the new Auckland lounge among the world's top 10.

Meanwhile, the carrier's 15 new A320 twinjets to be delivered over two years will initially operate on the Tasman before being put to work on Pacific Island routes. A decision whether to put them on domestic services and replace the 737s would be made later.

Mr Miller said the company was looking at some elements of Express Class that might work on the Tasman and Pacific operations.

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