Air NZ plans Link upgrade to meet regional travel boom

By Graeme Kennedy

Friday 21st May 2004

Air travel is booming through the regions, with Air New Zealand planning more capacity and upgrades for its three Link carriers to meet increasing demand.

Driven by the airline's Express Class fare structure introduced 18 months ago, traffic is at record levels and still climbing on most routes.

Group general manager for airlines Rob Fyfe said the Link carriers, Mount Cook, Eagle Air and Air Nelson, were two or three years ago operating "adequately" but their performance had significantly improved and they had become a real option to alternative travel such as cars, trains and buses.

"We are getting better returns with the lower Express fares," Fyfe said. "Making profits is all about keeping aircraft full and the Link carriers now contribute about 10% of Air NZ's revenues.

"We are hearing about the high cross-rate affecting rural economies but we are not seeing any downturn in the regions and that is very positive.

"Our challenge is capacity as demand is very high and we are looking at new aircraft types we are now reviewing replacements for Air Nelson's Saab 340s, which are coming to the end of their life, and there is an option to increase fleet sizes.

"A benefit for airlines being part of a larger group is their access to capital they are performing well and have staked a claim for investment."

Fyfe said the three Link carriers, although wholly owned, operated as stand-alone businesses with their own boards to retain local identity and culture and were run as SMEs for rapid responses to conditions and demands.

The airlines were integrated within the Air NZ network, with aircraft sizes ranging from Eagle's 19-seat Beech 1900D to the parent carrier's 130-seat Boeing 737 and could be switched to any route to match growth.

Christchurch-based Mount Cook Airlines' passenger traffic increased 19% to 1.3 million with 60% business travellers after Express Class was launched, general manager Peter O'Regan said.

"With the lower fares, small businesses could afford to fly, whereas in the past they either drove or didn't go at all," O'Regan said. "We have always been perceived as a leisure airline because of the places we fly to, such as Rotorua, Queenstown, Te Anau and Mount Cook but we have always had business traffic.

"The domestic market has been growing rapidly and how long that will continue will be determined by external factors such as the economy."

Begun in 1927, Mount Cook operates 10 66-seat ATR-72 turboprops to 11 destinations with 550 flights a week. Air NZ bought 77% of the company in 1985 and became 100% owner in 1990, the year before it launched the Link branding.

Eagle Air general manager Doug Roberts said his carrier's biggest competition was the road. "We operate short sectors which are under three hours' driving time so we must produce a product with the right frequency, timing and price," Roberts said. "Eagle flies to all the medium-sized provincial towns like Timaru, Gisborne, Kerikeri and Whakatane as the mainstay provider of air services to provincial New Zealand."

Eagle operates 1100 flights a week on routes from Kaitaia to Invercargill with its fleet of new 19-seat 1900Ds and carries 750,000 passengers a year.

Roberts said business traffic dropped from 70% to 60% after the Express fares attracted more leisure travellers attending events and visiting friends and relatives.

Eagle began in 1969 as a Hamilton flight training school and grew into an airline. Air New Zealand acquired 50% in 1988 and the rest in 1991.

Air Nelson was started in the 1980s by Origin Pacific managing director Robert Inglis who sold 100% to Air NZ in 1995 after the carrier acquired 50% in 1988. The world's seventh-largest operator of 33-seat Saab 340 aircraft with a fleet of 11, Air Nelson carries one million passengers annually on 860 flights a week to 11 destinations.

Comments from our readers

No comments yet