ANZ, Qantas Scramble to Fill UA Service Cut

With United dropping Auckland service, two foreign carriers step up to the plate

By: Kevin Brass

Even as Air New Zealand and Qantas talk merger, the two carriers are racing to add flights between the U.S. and New Zealand in the wake of United Airlines’ decision to end its Auckland service.

United is ending its New Zealand service after 17 years on March 27, leaving Air New Zealand and Qantas as the only major carriers offering direct service between the U.S. and Auckland. United offers daily flights to Auckland, representing about 30 percent of the available direct flights.

Bankrupt United’s departure “is unfortunate for the marketplace,” said Gary Murphy, president of Brendan Tours.

New Zealand is reaping a bonanza of publicity, thanks to the “Lord of the Rings” and the America’s Cup races. Lonely Planet recently listed New Zealand as one of its top 10 hot destinations for 2003.

In 2002, New Zealand attracted more than 200,000 visitors from the U.S., compared to 140,000 in 1997, according to Tourism New Zealand data.

To help handle the traffic, Air New Zealand is increasing the number of its U.S. flights from 14 to 17 a week on April 30, after moving from 10 to 14 flights a week last November. Qantas is expected to add two more flights to its existing schedule of seven flights a week, although a company spokesman couldn’t confirm details.

In effect Qantas will raise its leisure travel capacity next month when it eliminates first class seats on its U.S. flights.

Factoring in the additional flights, the number of seats available from the U.. to New Zealand will actually increase in 2003, despite United’s departure, according to an Air Zealand spokeswoman. More than 10,000 seats will be available for leisure travel from April to October in 2003, an 18 percent increase from the same period in 2002.

Complicating matters, last November Qantas agreed to pay about $225 million for 22.5 percent of Air New Zealand. The pending merger, which still faces several hurdles before approval, has prompted howls of protests from critics in New Zealand who believe the deal will threaten the sovereignty of the national airline and lead to higher air fares by eliminating competition.

But Air New Zealand officials insist the merger won’t affect fares.

“Other destinations are as much as a competitor to us, if not more, than other competitor carriers,” said Peter Walsh, vice president of the Americas for Air New Zealand. “We will need to ensure that our pricing is not only profitable for Air New Zealand, but also remains at a level acceptable to the consumer.”

Supporters see it as badly needed life support for Air New Zealand, which received a $495 million infusion of cash from the government a year ago. “From our point of view, [Air New Zealand and Qantas] will strengthen each other and we’d like both to survive,” said Ann Hartl, special projects manager for ATS Tours.

ATS doesn’t use United, so it won’t be impacted by the company’s departure from the market, “other than United clients will be trying to use our seats,” Hartl said.

“Seats do get tight,” especially during high season, she added. Tourism New Zealand is focusing a large part of its promotional efforts on encouraging travel to New Zealand in off months, according to Gregg Anderson, regional director of North America for the government tourism agency.

“There’s never been a summer that we don’t have a bottleneck” for airline seats, Anderson said. “Our challenge is to educate travel agents and consumers that New Zealand is a wonderful place to visit in March.”

United, which will continue to offer flights to New Zealand through its code-sharing deal with Air New Zealand, provided tour operators with easy access to New Zealand from the Midwest and East.

“In past, United would have very competitive rates out of the secondary cities,” said Murphy of Brendan Tours. “Hopefully the agreements they come to with Air New Zealand will still have competitive air fares out there for people from non-Air New Zealand gateways.”

Beyond spotlighting the company’s financial woes, United’s decision to end New Zealand service reflects the longstanding inability of U.S. carriers to make the U.S.-Auckland route profitable.

In 1990, American Airlines introduced regular flights to Auckland via Honolulu. But American discontinued the route a year later, and now is satisfied to code-share with Qantas, according to an American spokesman, Al Becker.