Air NZ Ends Hong Kong – London Link after Agreeing Cathay Pacific Partnership

Air New Zealand has announced it will suspend its existing flights between Hong Kong and London (an extension of its services from Auckland) from spring 2013, although it will continue to serve the UK capital via Los Angeles. The route will close on March 4, 2013, according to the carrier, after it formed an alliance with Cathay Pacific Airways on the Auckland - Hong Kong city pair. This arrangement, another cross-alliance partnership, further suggests that the traditional global alliance model may now have outlived its years.

The Star Alliance member says the route cancellation is part of its strategy to return its international network to profitability and will be supported by the continued implementation of an alliance based network with a Pacific Rim focus, through a partnership with oneworld member Cathay Pacific on the Auckland – Hong Kong route. According to Chief Executive Officer Rob Fyfe, a comprehensive review of the Hong Kong – London service confirmed the route would not become profitable in the foreseeable future.

“At the same time, we wanted to strengthen our presence in Hong Kong which is an important market and vital gateway into Mainland China for Air New Zealand. In line with this we have received approval from the New Zealand Ministry of Transport to form a strategic agreement with Cathay Pacific effective from 12 December 2012,” he explained. “The agreement will see both carriers continue to operate the same frequency between Auckland and Hong Kong while introducing code share on each other’s flights as well as opening up excellent connections between New Zealand and Mainland China.”

Air New Zealand operates daily year-round services between Auckland and Hong Kong, while Cathay Pacific operates daily year-round services, increasing to up to double daily in the peak period between December 2 and March 1. Although the partnership with Cathay Pacific will be launched in December 2012, it will not come into effect until January 31, 2013. In 2011, an estimated 165,000 O&D passengers travelled on the route with Cathay Pacific holding an approximate 51 per cent share of this traffic and Air New Zealand around 30 per cent.

According to schedule data, Air New Zealand has been serving the London market since October 1990 when it commenced flights between Auckland and London Gatwick, via Los Angeles, switching to London Heathrow in December 1994 after the carrier secured slots at the international gateway. It introduced the routing via Hong Kong in October 2006 and over recent years has been flying between five and seven weekly rotations using a Boeing 777-200. In 2011, Air NZ held around an eight per cent share of the approximate 965,000 O&D passengers that travelled between Hong Kong and London, although its flight would also have been carrying New Zealand originating or destination passengers too.

Air New Zealand’s boss Rob Fyfe says the decision to exit from Hong Kong – London will enable more capacity to be redeployed onto the North American destinations of Los Angeles and San Francisco. Last month, Air New Zealand announced a further 5,000 return seats would be introduced to its North American routes through to the end of June 2013. Releasing capacity from Hong Kong – London enables the continuation of this additional capacity, says the carrier.

“We’re excited about our upcoming move to the Tom Bradley terminal at Los Angeles International Airport where Air New Zealand has been contracted to design and operate a brand new and much improved Star Alliance lounge, making Los Angeles a great place to connect through to London or destinations further into Europe. We remain committed to servicing Europe via these daily Los Angeles – London services.”

Meanwhile, Air New Zealand has launched the first of its new ‘Night Rider’ domestic services. These special no frills flights were announced last month and sees the carrier offering single tickets on the last daily rotations between Auckland and Wellington for as little as $29 (or $39 for a ‘seat + bag’). The first flights, operated using 133-seat Boeing 737 equipment, departed the two New Zealand airports on November 5, 2012.

According to Air New Zealand Group General Manager Australasia, Bruce Parton, the ‘Night Rider’ services have been a huge hit with customers, with seats sold out in both directions for the next two weeks. “Sales have been particularly strong for Friday and Sunday nights and flights around key events such as February’s Wellington Sevens and Coldplay’s concert in Auckland this coming weekend,” he said. The ‘Night Rider’ services depart Auckland and Wellington at 10:00pm (09:00pm from Auckland and 10:30pm from Wellington on Saturdays).

Although Air New Zealand says passengers still get to enjoy the carrier’s normal customer service, from crews dressed in special ‘Night Rider’ bathrobes, the late flights skip the traditional in-flight drink and snack service onboard and passengers travelling on these fares are not eligible for Koru Lounge entry prior to departure. Passengers are also not able to fly on the services as a connection on a domestic or international flight.

The initial bookings are already suggesting that this marketing concept on the existing flights is already stimulating demand on the route and increasing visitors to both cities. “There has never been a service like this in the market before with fares for an entire plane priced at $29. Customers are now be able to fly between Auckland and Wellington for less than the cost of a third of a tank of petrol for the average family car,” said Rob Fyfe. “The domestic market is critical to the success of our business and the ‘Night Rider’ flights are part of a wider strategy to stimulate more people to fly”.

In the table below we highlight the Auckland – Wellington market in greater detail and how capacity has changed since the Millennium. Although the figures show declines since 2008 - capacity has fallen by 11.0 per cent and departures by 20.5 per cent - it shows that larger aircraft are now being utilised on flights. Latest schedule data suggests growth in both departures and capacity in 2012.

This month Air New Zealand is operating up to 23 flights a day on the route and faces competition from Jetstar Airways which offers between six and ten rotations a day. An estimated 1.74 O&D passengers travelled on the route in 2011, up 0.4 per cent on the previous year.