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Tenth year for tiny fare flier

By Graeme Kennedy

Friday 28th November 2003

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Freedom Air begins its ninth year of operation confident of a continued profitable future in the increasingly competitive and confusing Tasman market.

The Air New Zealand low-cost subsidiary will keep its no-frills leisure traffic niche at the bottom of the fare range ­ $10-15 below the limited lowest fares offered by Qantas and its parent's new Tasman Express service while matching Richard Branson's new carrier Pacific Blue, due to start Christchurch flights early next year.

Acting general manager Mike Young said Freedom's existing schedule would also match Pacific Blue's with its daily Christchurch to Queensland services, split between Coolangatta and Brisbane.

Freedom's pre-tax $189 one-way fare would be about the same as the newcomer's, Mr Young said.

"We see ourselves as the airline offering leisure and visiting friends and relatives (VFR) travel to Australia, the fun, hassle-free professional carrier taking people to holiday destinations," he said.

"Business traffic is very small with us while Pacific Blue is going for a market outside ours and although there will be some overlap they will compete more head-on with Tasman Express, trying to get the business traffic as well while we keep to the traditional value- based airline (VBA) model.

"They are VBA-plus and that adds cost, which must be reflected in the cost-price equation.

"We are confident about our future but cautious about growing too quickly.

"We have been profitable for a long time because we do what we do well ­ ensuring people have good flights with us ­ and we will not allow Pacific Blue to distract us from that.

"We have a good formula for a very competitive future, so why change a successful formula?"

Freedom, created to counter Ewan Wilson's Hamilton-based low-cost carrier Kiwi Air, made its first flight from Auckland to Sydney with a leased Britannia Airways' Boeing 757 on December 8, 1995.

The new airline leased a 737 from El Salvador carrier TACA for 12 months before gaining its own airline operating certificate in mid-1997.

Mr Young, former pilot and general manager of light aircraft engineering and pilot-training company Flightline, was brought in as operations manager to run the transition. He has been acting general manager for the past year while Wayne Dodge recovers from illness.

With a fleet of four 737s and staff of 220 including 50 pilots and 85 cabin crew, Freedom now flies up to 52 Tasman sectors a week connecting Auckland, Hamilton, Palmerston North, Wellington, Christchurch and Dunedin with Melbourne, Sydney, Brisbane and Coolangatta, carrying 500,000 passengers annually for the past two years.

The carrier over Christmas and New Year in 2001-2002 briefly operated into Newcastle ­ the gateway to the Hunter Valley wine region and resort destinations of Nelson Bay and Port Stephens ­ but it was unfamiliar territory to New Zealanders and the service was withdrawn through lack of traffic.

Freedom briefly went domestic in 2001 to provide capacity lost when Qantas New Zealand collapsed.

Mr Young said Freedom's fare structure and product then was a model for Air New Zealand's domestic Express Class introduced with huge success a year ago.

"We pioneered no-frills and web bookings in New Zealand and offered fares about $70 lower than full-service Air New Zealand," he said. "We had 80% of bookings online for the domestic services and now get 65% on the Tasman.

"Low-cost operations come partly from product where passengers pay for drinks and snacks but the big savings come from distributions costs ­ no commissions and call centre and web bookings."

Freedom also saves by having no loyalty programme or a connecting traffic reservation service. "We are purely point-to-point travel so we keep the complexities out of the business," Mr Young said.

"We try to under-promise and over-deliver and customer surveys tell us they don't expect a lot because of the fare they pay but they are impressed with the service they get.

Freedom gave away 5000 seats in an eighth birthday radio promotion two weeks ago ­ for use between May and June next year, they were snapped up in 14 hours.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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