What’s next for Air New Zealand after its breakup with Virgin Australia?

As we abruptly found out last week, Air New Zealand has decided to end its seven year partnership with Virgin Australia, on the basis of changing ‘commercial reasons’.

The partnership ends on 27-Oct-2018, the last day of the current scheduling period, which opens up opportunities for both airlines to launch new routes across the Tasman.


Highlights:

  • Air New Zealand will launch two new routes across the Tasman from Dec-2018.
  • Air New Zealand will add an extra 15% seat capacity across all its Tasman services year-on-year.
  • Blue Swan predicts potential new destinations that Air New Zealand will be launching in Australia, including Canberra, Newcastle and Hobart.

To read more about the announcement and possible options, check out our analysis: Virgin dumped. And now for war? There will be blood.

Air New Zealand has a few different options it is proceeding with: Add in more widebody services on the key city pairs, something it can do at almost marginal cost, where it has any spare capacity; and establish new routes (and frequencies) on Australia’s east coast (and beyond).

As predicted in the analysis, Air New Zealand has announced that it is doing exactly this. Yesterday Air New Zealand advised it will be launching “two new routes across the Tasman from December this year and add[ing] an extra 15% seat capacity across all its Tasman services year-on-year.”

From 18-Dec-2018 Air New Zealand will operate up to four times a week on the Queenstown-Brisbane route, increasing the airline’s total international capacity from the resort town by 2%.  It will also operate up to five times a week on the Wellington-Brisbane route – an increase of 20,000 seats, or 15%.

In addition to the new routes, Air New Zealand is adding significant extra trans-Tasman capacity into and out of Christchurch from 28-Oct-2018.  This includes moving to twice daily on peak days of the week to both Melbourne and Brisbane, and twice daily Monday to Friday for Sydney.  This represents a 15% increase in capacity, close to 35,000 extra seats, on Christchurch trans-Tasman routes alone.

Air New Zealand will also offer 125,000 additional trans-Tasman seats ex Auckland, including a new morning flight to Melbourne timed for business travellers, more evening flights to Brisbane, and a new middle of the day flight to Sydney.

We believe this capacity increase will go one step further, and Air New Zealand will announce new destinations it has never serviced before.

Potential new destinations that Air New Zealand is about to launch:

  • Canberra, ACT

We already know, from a recent interview with Canberra Airport MD Stephen Byron, that the airport is targeting a route to New Zealand. It seems logical that this would also be a target for Air New Zealand, without the Virgin Australia partnership.

Expect to hear more news on this very shortly, but in the meantime hear what Mr Byron had to say on the topic in the interview below:

  • Newcastle, NSW

Newcastle, a regional town approximately two hours north of Sydney, would be another good option for Air New Zealand. Newcastle is Australia’s largest regional city, with a population of more than 400,000, according to the 2016 census.

Currently, international access to the area is via Sydney because Newcastle is yet to secure an international route. AirAsia recently announced it was eying options to launch services to Newcastle to become the area’s first international route.

  • Hobart, Tasmania

As Australia’s fastest growing tourist destination, Hobart in Tasmania is the perfect option for Air New Zealand, given the growing interest in this area. Spending by overseas tourists in Tasmania jumped 31% in 2017, and has grown almost 90% in the last three years.

In 2017, New Zealand visitors to Tasmania jumped 15% year-on-year and this figure looks to continue its upward trajectory. Currently, no direct link exists between New Zealand and Tasmania.