Air NZ's refit strategy aims to win back corporates

By Graeme Kennedy

Friday 9th July 2004

Air New Zealand's $160 million cabin upgrade will make its long-haul product internationally competitive and hopefully bring back corporate business which has left in the past few years for other carriers' superior services.

The national airline's little-used first-class seating has been looking tired alongside its rivals' smarter offerings including lie-flat seat-beds some even in business class.

But the new initiative, which will be completed on the carrier's Boeing 747 fleet by late next year, changes all that and Air New Zealand's single Premium Class and Super Economy have the potential to become one of the most advanced and cost-effective systems in the air.

Group general manager for airlines Rob Fyfe said the refit strategy was, like most major decisions today, customer-driven and linked to what passengers were prepared to pay.

"Domestically, we took meals off when people told us they would prefer cheaper flights and that food was incidental," Fyfe said. "But for long-haul, comfort and in-flight entertainment were identified in surveys as most important factors.

"They said they were prepared to pay for us making time pass more quickly and comfortably we are not the lowest-cost airline in every market but we must give customers what they want.

"Our challenge is that the majority of our international flights are 10 to 12-hour sectors and many are overnight. Inbound visitors on long journeys are saying they want the barrier between leaving home and starting a holiday in New Zealand to be as comfortable as we can make it.

"Our aircraft fly a lot in a year and the life of a new interior is five to seven years, so we need a relatively small increase in load-factor or shift in market share to justify the investment."

Fyfe said Air New Zealand had had little demand for its 12-seat first-class cabin, with most customers upgraded to the prestige area by using air points rather than cash.

"We are predominantly in the leisure market and do not have the volumes of high-net-worth individuals to warrant having first," he said.

Air New Zealand chose a full 202cm lie-flat seat developed by Sir Richard Branson's Virgin Atlantic and UK firm Contour Premium Aircraft Seating a piece of furniture that at about $100,000 costs about the same as a new 5 Series BMW.

The airline is only the second to use the seat after Branson's Virgin, which gained a 5% North Atlantic market share after it was fitted early this year.

The seat is installed in a herringbone layout to give every passenger direct aisle access. Premium Class will offer meals midway between first and business, with tray service to seats rather than from a trolley. Fares will be business class.

"We struggled to find a better seat," Fyfe said. "We have put a first-class product in Business we could not have created a better cabin."

Air New Zealand will fit 46 of the seats in the main cabin and on the upper deck, where it will share space with its new Super Economy product with 23 seats offering a pitch of up to 102cm, compared with regular economy's 87cm.

The new seats are wider than normal and will recline twice as far.

Fyfe said Super Economy would be priced 20% above regular while Premium would be twice the economy rate. Super Economy travellers would receive premium food and beverage service.

State-of-the-art video screens in every seat will feature movies, features, games and music.

"Surveys we have done show that the top priority for customers in every cabin is entertainment, so they can occupy themselves over long periods," Fyfe said. "Entertainment was more important than the seat.

"We have had loyal corporates but our product slipped behind the competition and some corporate travellers preferred other products. Hopefully, this will bring that business back to Air New Zealand.

"The business travel market will also find Super Economy attractive. A lot of staff has been required to fly economy but for 20% more they will get a more comfortable trip cheaper than Business Class."

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