Air New Zealand expands in Argentina as Australasia-South America capacity reaches record levels

Air New Zealand is increasing capacity to Buenos Aires by more than 30% this summer in response to increasing demand for travel between Australia/New Zealand and Argentina.

Argentinean visitor numbers to Australia and New Zealand have increased over the last year by 29% and 41% respectively. Outbound traffic from Australia/New Zealand to Argentina is also growing, driven by the ethnic and leisure segments.

Air NZ launched services from Auckland to Buenos Aires in late 2015 with three weekly flights. Last summer Air NZ increased capacity to Buenos Aires by offering a fourth frequency from mid-December to early March. It has since maintained three weekly flights, including for the entire current winter season.

This summer Air NZ is offering a fourth frequency to Buenos Aires from early November, which marks the beginning of the summer schedule. A fifth frequency will be operated for the first time from early December until March 2018. Air NZ will therefore have an average of 4.8 weekly frequencies on the Auckland-Buenos Aires route this summer compared to approximately 3.6 weekly frequencies last summer.

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Air NZ also has added to its Buenos Aires schedule a fourth weekly frequency from 25-Mar-2018 until 30-Apr-2018, which is the first five weeks of the winter season. The airline for now plans to revert to the normal three weekly flights per week schedule from May-2018, which is an off-peak month for Australasia-South America travel.

Air NZ has operated 787-9s on the Auckland-Buenos Aires route since the beginning of the 2016/2017 summer season. Initially it operated the route with the slightly larger 777-200s.

Air NZ has benefitted from offering the most convenient one-stop product to Buenos Aires from several Australian cities. Australians now account for approximately 40% of Air NZ’s Buenos Aires traffic. Air NZ holds approximately a 60% share of total Australia-Argentina traffic.

Sydney was served with nonstop flights from Buenos Aires until 2014, when Aerolineas Argentinas suspended the route. Qantas also operated Sydney-Buenos Aires until 2012, when it instead launched Sydney-Santiago.

Regaining a link to Buenos Aires is a priority for Sydney Airport. However, this is unlikely for at least the next few years, as Blue Swan has previously analysed. Therefore, Air NZ should be able to continue to enjoy its strong position in the Sydney-Buenos Aires market for some time.

See related report: Can the Argentina-Australia market again support a nonstop service?

Qantas now competes with Air NZ in the one-stop Sydney-Buenos Aires market with the Santiago-Buenos Aires sector being operated by oneworld partner LATAM. Qantas and LATAM currently only offer a two-stop product to Buenos Aires from other Australian cities, giving Air NZ a competitive advantage. However, LATAM is launching nonstop flights from Melbourne to Santiago on 5-Oct-2017, which will provide a new one-stop option in the Melbourne-Buenos Aires market.

See related report: LATAM Airlines to further grow Australia traffic as Melbourne is launched

The decision to add capacity to Buenos Aires could be seen as a competitive response by Air NZ to the intensifying competition (and significantly higher levels of capacity) in the overall Australasia-South America market.

During the peak months this summer, there will be a record 20 weekly flights from Australasia to South America. This consists of five frequencies from Air NZ, five from Qantas and 10 from LATAM (including three on the new Melbourne-Santiago nonstop route and seven on the Sydney-Auckland-Santiago route, which it launched in 2002).

Seat capacity from Australasia to South America will approach a record 7,000 weekly seats one-way in Dec-2017 and Jan-2018.

Australasia-South America one-way weekly seat capacity: Sep-2011 to Feb-2018

Source: CAPA – Centre for Aviation & OAG

The record level of capacity should be absorbable given the growing demand for air travel between Australasia and South America. Australia reported a 29% increase in visitor numbers from Argentina in the year ending Jul-2017 to 21,000 and a 9% increase in visitor numbers from Chile to 23,000. There was also a 19% increase in visitor numbers from Brazil, to 52,000.

New Zealand reported a 41% increase in visitor numbers from Argentina in the year ending Jul-2017 to 17,000. Brazilian visitor numbers to New Zealand were up 24% to 16,000. New Zealand does not provide visitor numbers from Chile as it is a very small source market for New Zealand (the LATAM service to Auckland relies heavily on traffic continuing to Sydney).

Air NZ serves the growing New Zealand-Brazil market using its partnership with Aerolineas Argentinas, which operates from Buenos Aires to several Brazilian destinations. Qantas uses partner LATAM to access Brazil, where LATAM has a subsidiary airline and serves several cities from Santiago.

Air NZ and Qantas are keen to operate nonstop flights to Brazil at some point. Both are now evaluating new generation ultra-long range aircraft which could make an Auckland or Sydney to Sao Paulo or Rio de Janeiro route viable.