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Air New Zealand believes Pacific Blue exit will increase domestic competition

27-Aug-2010 11:20 AM

Air New Zealand CEO Rob Fyfe made the following comments after reporting the airline’s financial results for FY2009-10:

  • Pacific Blue exit: Mr Fyfe stated it will actually lead to increased capacity and competition in the country, with both Air New Zealand and Jetstar planning to introduce new aircraft (NZPA, 26-Aug-2010). The CEO also said the reduction in competitors was unlikely to result in an increase in fares, with the arrival of an A320 for the carrier to allow it to align its cost base more closely to Jetstar’s (The Australian, 27-Aug-2010). He added that the airline would defend itself against any other carriers now looking to enter the market;
  • Virgin Blue JV: Air New Zealand is confident it will receive regulatory approval for plans to launch a trans-Tasman JV with Virgin Blue by year-end (BusinessDay.co.nz, 27-Aug-2010). Mr Fyfe warned a rejection of the plans would force the carrier to further cut operations on less profitable routes;
  • Capacity: the carrier plans to focus on increasing capacity on existing routes but will look into developing new routes at the end of 2011 (NZ Herald, 27-Aug-2010);
  • Rugby World Cup: Air New Zealand is considering borrowing aircraft from other carriers to increase capacity during the Rugby World Cup in 2011 (BusinessDay.co.nz, 27-Aug-2010);
  • Industry recovery: Chairman John Palmer stated the industry is showing signs of a recovery, with improving demand and yields;
  • Remuneration: Mr Fyfe’s total remuneration for FY2009-10 was NZD2.4 million, up from the NZD1.5 million he received in FY2008-09. The carrier stated its philosophy is to set fixed base salaries at 90% of the market median for fully competent executives. These salaries were frozen in 2007, with the freeze lifted in Feb-2010, with the first salary adjustments to be considered for the FY2010-11. 

Air New Zealand: “With Pacific Blue having exited two aircraft from the NZ market, we've already announced that we're bringing in the equivalent of two new aircraft. Jetstar has announced that they are also bringing two new aircraft into the market, so double the capacity is coming in to what has left. We are both going to be working hard to fill those seats, so I think the competition will be very, very vigorous … The way to lose money in this business is to fly around half-empty aircraft. The price of airline seats is ultimately dictated by how challenging airlines find it to fill their seats, so if their aircraft don't fill up, we drop the prices to try and stimulate more people to travel … In terms of guarantees to the travelling public, if we don't offer a very competitive service in this market there are plenty of airlines that will jump in and fill that void very quickly and we're not about to let that happen,” Rob Fyfe, CEO. Source: NZPA, 26-Aug-2010/The Australian, 27-Aug-2010.