Minister extends Hong Kong airline alliance

See also: Air NZ delivers bumper $327m profit on strong demand, lower fuel prices

Transport Minister Simon Bridges has renewed the Air New Zealand [NZX: AIR] and Cathay Pacific partnership between Auckland Hong Kong despite objections from the tourism industry.

The two-and-half-year-old alliance has been extended for four years from its expiry on January 31, 2016, until October 31, 2019.

“This alliance has ensured the airlines work together on tourism and marketing initiatives so travellers can continue to benefit from more seats, improved flight schedules, shorter connection times, and reciprocal frequent flyer schemes,” Mr Bridges says.

Since the alliance was approved in 2012, visitor arrivals from Hong Kong to New Zealand have increased by more than 16%, Mr Bridges says. Cathay Pacific recently announced it will operate an extra 13,500 seats on the Auckland-Hong Kong route in the 2015/16 peak summer period.

“While the alliance has given travellers to and from Asia more choice and flexibility than would otherwise have been the case, there is room for further improvement. My expectation is that Air New Zealand and Cathay Pacific will continue working to show the alliance is in the best interests of consumers.

“The aviation industry is firing on all cylinders, with low fuel prices and strong demand for international travel. The government is monitoring the Hong Kong route to ensure airlines are responding to these favourable conditions when setting their fares and schedules,” Mr Bridges says.

Industry raises objections
As previously reported by NBR, the Tourism Industry Association and at least one airport objected to a lengthy renewal, saying it prevented other routes to Hong Kong and restricted tourism growth.

It was also reported traffic capacity on the route has fallen since 2010 in comparison with Singapore.

The agreement has been operating since January 2013 and enables both airlines to share the revenue. It followed Air New Zealand’s decision to drop Hong Kong as a stopover on a westward leg to London.

In a joint statement, the airlines say the deal has delivered a range of benefits to travellers, including a choice of up to three frequencies per day, reciprocal frequent flyer benefits and enhanced connectivity to and from both carriers’ networks.

This includes Cathay Pacific’s international network and that of its regional subsidiary Dragonair.

Air New Zealand chief executive Christopher Luxon says the deal also plays an important part in the airline’s Pacific Rim strategy.

Currently the carriers operate one daily return service each, increasing to a total of three daily return services over peak months in the northern winter season.

Analysis by CAPA, the Centre for Aviation, shows airline capacity (ie, the number of seats available) on the Auckland-Hong Kong route dropped 18% between 2010 and 2015.

By comparison, capacity between New Zealand and Singapore has increased 20%, making its potential traffic 45% higher than Hong Kong. In 2010, both Asian centres were on a level-pegging status.

Christchurch Airport, which has up to 10 weekly flights to Singapore, questioned the Hong Kong-Auckland agreement, saying it restricted potential traffic to other airports in New Zealand.

The wider picture is that Hong Kong is no longer the only entry point into China and the Air NZ-Cathay alliance is catering for fewer passengers.

In fact, when Cathay introduces its Airbus A350s to the route, it will cut seat numbers by 6% with the exit of A340s, CAPA says.

Air New Zealand shares fell 1.9 percent to $2.62.

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