Air fares set to tumble as Air NZ invests $3.5b in new aircraft and retrofitting fleet
Wednesday, 10 May 2023
Air New Zealand will invest $3.5 billion in new aircraft and refurbishing its existing fleet over the next five years, chief executive Greg Foran says.
New aircraft will include eight 787-9 Dreamliners and five Airbus A320neo aircraft to add more seats on the airline’s Tasman and Pacific Island services, Foran said.
The national carrier is also in final negotiations to secure another Boeing 777-300ER, which would bring the total 777-300 fleet to eight, and will refurbish its existing fleet of 14 Boeing 787 aircraft.
Speaking at Trenz, the country’s largest annual tourism showcase event, in Christchurch on Wednesday, Foran said the investment would help attract more “premium leisure” customers from the Pacific Rim.
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House of Travel chief operating officer Brent Thomas said Air New Zealand’s announcement was not surprising given the wave of competition returning to New Zealand this year, driving down fares.
The North America market would be particularly competitive in the last three months of this year with so much capacity coming on form multiple airlines, including United Airlines, American Airlines and Delta direct from the United States, as well as Pacific carriers Air Tahiti Nuie and Fiji Airways flying one-stop to North America, Thomas said.
That would make the trans-Pacific one of the fastest growth areas over the next 12 months, and airfares would come down, he said.
The increase in seats from all those carriers meant there would be more of the cheapest seats available. “Which is going to be the boon for the outbound travel. And it is a reflection of the inbound travel starting to come back from North America,” Thomas said.
Australian rival Qantas would compete directly with Air New Zealand on the Auckland to New York route from June 14, “and we suspect that is not going to be the end of that from their perspective,” Thomas said.
The travel market was “incredibly buoyant and has not waned”, he said.
Forward bookings were strong after 14 months of pent-up demand for international travel.
Air New Zealand was advertising special fares from Auckland to Los Angeles for $1517 return for travel on select dates between August 24 and March 23. That compares to $1657 on Delta which will start competing on the route from October 28 with a daily return flight.
But competition on the Tasman has not yet returned to pre-Covid levels, with Virgin Australia having pulled off the route. That could change when more eastern and Asian carriers returned to fly to New Zealand, including some services via Australia, adding a large number of seats on the Tasman, Thomas said.
The return of the Chinese airlines would be another a game changer for fares, because they previously offered competitive pricing to China and beyond.
Airlines have also ordered a lot of new aircraft that would have to be deployed somewhere, and New Zealand could benefit from that, he said.
Foran said Air NZ would also invest $30 million in marketing campaigns in key international markets this financial year to target “high-quality” visitors, he said.
'Our significant capacity increases across our international and domestic network, coupled with our marketing investment, will help to showcase New Zealand to the world and attract more quality visitors to our shores.”
Ahead of the Trenz event, Foran said Air New Zealand’s seat capacity on international routes was back to about 91% of pre-Covid levels and bookings were holding steady.
Air NZ now had more seats on its Asia network than it did before Covid, at 117%, and its North America network was close to what it was before the Covid-19 pandemic struck.
Capacity on Air NZ’s Tasman and Pacific Island network was also nearing pre-Covid levels, he said.