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Luxon flags more trans-Tasman growth

written by australianaviation.com.au | August 27, 2014

ZK-NZE arrives in Sydney. (Lee Gatland)
Air New Zealand is planning further trans-Tasman growth. (Lee Gatland)

Air New Zealand chief executive Christopher Luxon says the Kiwi carrier is planning for further growth across the Tasman even as a stronger Kiwi currency affects the market.

Luxon says Australia was an important source of future growth for the airline, which on Wednesday reported a 45 per cent lift in net profit for 2013/14 to $NZ262 million.

“We are certainly holding our own and being very competitive on the Tasman,” Luxon told reporters during the company’s results presentation.

“In the coming year we would expect in the range of two to three per cent growth, about three per cent growth in capacity share.

“Australia remains a huge opportunity for us. It might be growing a slightly bit slower than other parts of Asia but it is still incredibly important.”


Luxon said the New Zealand dollar’s strength – the Kiwi reached a high of about 88 US cents in early July, compared with 77 cents a year ago – had “impacted a little bit on the Tasman”. However, he said it had been quite manageable.

The Air NZ-Virgin Australia alliance on trans-Tasman routes had about 52 per cent market share and was in good shape, Luzon said.

“Despite competitive activity we’ve been able to more than hold our ground in the last year and a half and we just are continually looking for opportunities to actually grow between the two countries,” he said.

“We feel quite positive about the Tasman and how our business is developing there.”

Air NZ said it expected to grow capacity, as measured by available seat kilometres, by six per cent in 2014/15.

The increased growth would come from extra seats in the domestic market as Airbus A320 aircraft replaced older Boeing 737s flying around New Zealand, as well as the use of more Boeing 777-300ERs to North America and the replacement of 767s with 787-9s to Asia.

The last Boeing 747-400 in Air NZ’s fleet will be retired in September, while the last of the 737s was expected to leave the fleet by September 2015.

The NZ flag carrier was also starting services to Singapore with Boeing 777-200ER aircraft on January 6 2015, returning to the Auckland-Singapore route for the first time since 2006.

Resumption of flights to Singapore was part of the recently approved alliance with Singapore Airlines, which will deploy Airbus A380s to Auckland over the peak summer period.

“I can look across the whole of our network and see some really strong performances everywhere,” Luxon said.

“When we look at the Pacific Rim region – around Asia, the Americas, Australasia – it is just a huge opportunity.”

Air NZ said it would treat its 25.99 per cent shareholding in Virgin Australia – the maximum the airline is allowed to hold by Australia’s foreign investment review board – as an equity investment in its accounts in 2014/15, after Luxon joined the Australia airline’s board.

Although he declined to comment in response to a question regarding when Virgin would make a positive contribution to Air NZ’s accounts given he was now a board member – Virgin is expected to post a full year loss for 2013/14 – Luxon said the strategic rationale for buying into Australia’s second-largest carrier “still makes sense”.

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