Air New Zealand credited "innovation and performance improvement" for a near-quadrupling of its net income to NZ$82 million ($57.4 million) for its fiscal year ended June 30 compared to a NZ$21 million profit in the prior year.

The result was achieved despite a 12.9% year-over-year decline in revenue to NZ$4.05 billion. But efficiency gains, along with lower fuel prices, resulted in a 14.8% reduction in costs to NZ$3.34 billion and operating income was NZ$151 million, nearly double an operating profit of NZ$78 million in the prior year.

ANZ Chairman John Palmer said, "We continue to be more profitable than most of our peers on a comparable basis, with this financial performance reflecting the continued innovation and performance improvement that has seen us recognized with several major global awards including ATW magazine's 2010 Airline of the Year. The investments we are making in product enhancements, improved service and process efficiencies have driven customer preference—which in turn creates market share and margin premiums, even in the current difficult times."

CEO Rob Fyfe said ANZ's "wide range of business initiatives underway [include] significant capacity growth over the coming months [that will] further strengthen our position in the marketplace." The airline reduced capacity in FY2009-10, reporting an 8% year-over-year decline in ASKs to 31.57 billion. RPKs dropped 4.7% to 25.82 billion and load factor was 81.8%, up 2.8 points. Yield lowered 7.1% to NZ$0.128.

The carrier is planning to increase capacity in 2011 across its network, particularly on domestic and transtasman routes, through the addition of new aircraft, configuration changes and increased utilization. It said it is optimistic that operating earnings will continue to improve through FY2010-11.

Fyfe noted that ANZ "awaits regulatory approval [for a codeshare agreement with Virgin Blue] on both sides of the Tasman to enable us to compete more effectively against the Qantas Group in the Australasian market"

All of this adds up to an unavoidable conclusion that the highly competitive trans-Tasman and combined Australia/New Zealand domestic and international markets are going to continue to generate constant change and constant uncertainty for the incumbents. Although the nature of the competition will not always be consistently spread, it will certainly be intense.

Assuming the “logical” steps described above come about (a polarisation between Virgin Blue/Air New Zealand and Qantas/Jetstar; expanded cooperation between the two smaller carriers, probably into each others’ domestic markets through codesharing; Jetstar’s international expansion from a New Zealand base; and Qantas’ eventual entry into the New Zealand domestic regional market with turboprops), then this should be seen as a highly positive development in linking the two countries’ systems into a genuine single market.

For Virgin Blue, currently battling to go up-market into the enormously valuable corporate market, currently almost exclusively owned by Qantas (in Australia) and Air New Zealand (in New Zealand), this would be key to its future. For Air New Zealand, which has now cast its lot with Virgin Blue and will be more aggressively targeted by the Qantas Group, accelerating its access into the Australian market via its new partner will also become a priority. And to generate a broader international capability through improved access by each group to the respective domestic market must be good for consumers and for the economies of each country.

And meanwhile, thanks to the highly liberal access policies of each country (including allowing 100% foreign ownership of locally established airlines), there is always going to be a looming threat of entry by other carriers should market conditions look like becoming less consumer-friendly. The region’s lowest cost operations, AirAsia, AirAsia X and Tiger Airways, have noted the opportunities that exist in the trans-Tasman market. In due course too, as Indonesian low cost operators gain momentum, they too will be increasingly interested in opportunities in these high growth markets to their south.

Turning points are relatively frequent in Australasia; the collapse of Ansett and Air New Zealand in 2001, the latter’s renationalisation and the expansion of Virgin Blue –and now Tiger – to fill the gap, was a major trauma. But still Qantas/Jetstar remains highly dominant – with 65% domestic market share and probably 85% corporate share. A counterbalance to this would arguably be a positive for long term consumer interests. So we could be on the brink of a new reorientation of the power balance. It will not happen quickly and it will be a mighty struggle, but it does look as if the course has now been set.

The next challenge – for all concerned – will be to make the markets sufficiently profitable to secure a long term sustainable system. In an industry where the long term can be as little as five years, that may be a bridge too far.

In another concerning development for the incumbent carriers, Tiger Airways CEO, Tony Davis, stated Tiger Airways Australia is examining routes within a five-hour flying range from Australia for its A320 aircraft, including destinations in Indonesia, New Zealand and the Pacific islands. The CEO added the carrier has no plans to shift from its one aircraft-type fleet, as it allows it to maintain low costs.

Mr Davis commented: “ My game plan is to use my A320 fleet as efficiently as possible on whatever routes make sense. Airports like Darwin, like Perth [are] those that can access Asia. Brisbane to Indonesia works, Gold Coast to Indonesia, or going east to New Zealand or the Pacific Islands there are opportunities there as well. What I'm doing is drawing a circumference around Australia, and saying, 'Where is there within five hours of here?' There's quite a few places. But what I'm not interested in doing is buying a different aircraft type to go seven hours … Flying the A330, or the [Boeing] 777 or Dreamliner that some of our competitors have chosen to do, you add another set of pilots, another set of engineers, spares, a different aircraft type which you've got to go out and purchase — all of those things add cost and complexity to the operations”.

Meanwhile, AirAsia X CEO, Azran Osman-Rani, confirmed the carrier is considering launching services from the Gold Coast and Perth to either Auckland or Christchurch by year-end. Mr Osman-Rani stated the airline would have a “golden opportunity” to enter the trans-Tasman market if Virgin Blue and Air New Zealand’s alliance is approved. He added the carrier would not consider operating trans-Tasman services from Sydney or Melbourne as the routes are already well served.

Mr Osman-Rani commented: “The earliest opportunity would be the end of the year. We have gone into the market and met the airports in New Zealand. We will get there - it's when … We are relentless on this - we are going to keep pushing [to fly to Sydney] … From a timing point of view we have to make sure we use this year to really deliver good profits, otherwise there is not a listing story. We have to fund our own growth and, with the plane orders that we have, we won't reach a point where cash surplus from operations is enough to fund the new planes, so we have to close that gap through a new equity listing”.

In an immediate response to Virgin Blue’s decision, Jetstar announced it would significantly grow its domestic New Zealand operations over the next year "solidifying its position as New Zealand’s second airline".

The carrier has previously stressed that it is in "active pursuit” of future growth options within New Zealand and has plans rapidly to expand its presence there, moving more A320s into the domestic market.  The carrier also previously noted plans “actively” to review value-based long-haul flying. Jetstar Group CEO, Bruce Buchanan stated the carrier plans to launch services to a number of new markets with the carrier considering direct services to Asia and North America and three or four new trans-Tasman routes in addition to all routes where Virgin withdraws.

Jetstar has been steadily making inroads in the New Zealand domestic market, after a less than auspicious start in Jun-2009, when it took over from another Qantas subsidiary, JetConnect, and faced various annoying operational and customer service glitches.

Those issues have long since been overcome and, upon the release of its latest growth plans, Mr Buchanan, said: "Jetstar is to further expand our fledgling domestic New Zealand operations. We plan to further grow our existing domestic NZ routes and will investigate new destinations in line with our strong and expanding market presence since commencing domestic flying in June 2009. Jetstar has embedded itself as one of NZ’s two domestic airlines and as the clear low fares leader we will continue to invest in new services and growth."

The airline has announced it will position an additional two A320 aircraft in New Zealand within the next 12 months, bringing its fleet of New Zealand-based aircraft to eight. A seventh aircraft will enter service in Dec-2010 with an eighth anticipated to commence at the end of 2010, early 2011.

Jetstar stated its seventh A320 aircraft will support more domestic and trans-Tasman flying including the launch of Melbourne-Queenstown, Gold Coast-Queenstown and Auckland-Cairns flying, as well as incremental Auckland-Wellington and Auckland-Queenstown services. Mr Buchanan also stated Jetstar would look to build more frequencies from existing key ports in Auckland, Christchurch and Wellington with an expanded domestic operation “well in place” in advance of the 2011 Rugby World Cup (in the second half of 2011).

Jetstar currently operates on five domestic NZ routes between Auckland, Christchurch, Wellington and Queenstown and a trans-Tasman network commercially supporting ten routes, with an exiting fleet of six A320s, evenly split between its domestic operations and multiple daily trans-Tasman services from Christchurch and Auckland.

Mr Buchanan previously commented that this situation was ideal, stating: “The beautiful thing about the operation is that you've got full flexibility to rotate aircraft through it [domestic and trans-Tasman routes]”. He added that the carrier has “seen the fares increase reasonably consistently month-on-month” since launch”.

Announcements regarding aircraft scheduling with the additional fleet will be made in the near future.

Mr Buchanan previously commented: “Jetstar now has a pathway towards future strategic growth in New Zealand through our ongoing success and strong customer demand for our low fare services. With a well established brand, strong and efficient on-time operations, a partnership in growth with major New Zealand airports and a great Kiwi workforce, Jetstar is well advanced to deliver this next round of sustainable low fares flight expansion.”

As they evolve towards a single market, domestic New Zealand and trans-Tasman airline operations have become increasingly competitive and overcrowded, with the global financial crisis and overcapacity further pressuring demand and yields in the region. As Virgin Blue Group’s Pacific Blue exits the New Zealand domestic market, the scene looks set for a full fledged Australasian confrontation between two major competitors - in one corner the large and well entrenched Qantas Group with its dual brand strategy and in the other the emerging partnership of Air New Zealand and Virgin Blue. Since the two smaller carriers proposed their trans-Tasman codeshare in May-2010, Qantas now knows it is clearly on the opposing team and is likely to ramp up its competitive thrust. This in turn almost inevitably will push Air NZ and Virgin to explore closer ties – for which there is considerable logic.

Overcapacity and yield pressures in the Australian domestic market, along with the need to establish a comprehensive network, have encouraged Australian airlines to set their sights to the trans-Tasman and domestic New Zealand market. This brought further pain to New Zealand’s national carrier. But the competitive pressure was also too much for Virgin Blue’s Pacific Blue which, under new leadership, has announced plans to withdraw from the domestic market, having lost “tens of millions of dollars” there.

Meanwhile, Air New Zealand and Virgin Blue have sought regulatory approval to cooperate in the trans-Tasman market between the two countries. But the proposal stopped short of seeking to address the Australian or New Zealand domestic markets under the alliance - probably because this might jeopardise competition authority approval of the application (it would also cause the often over-zealous New Zealand Commerce Commission to become involved, whereas the proposed codeshare is a matter only for the Ministry of Transport, as a bilateral issue).

However, the agreement does mark a change in the competitive situation in the South Pacific market: The New Zealand market will now become a duopoly, albeit dynamic. But this is unlikely to be a comfortable affair; Jetstar will be fighting to capture market share, suggesting a continued discount battle on domestic trunk routes. Meanwhile, a reinforced combination of Air NZ and Virgin/Pacific Blue on trans-Tasman routes should ensure no reduction of competition in that near-bloodbath international market too.

This implies a clear competitive realignment: Virgin Blue/Air New Zealand vs Qantas/Jetstar. The battle is now on. Air New Zealand’s lucrative regional market possibly to become the next area under fire. With intensified hostilities, it is probably only a matter of time now before Qantas/Jetstar takes the next logical step of chasing Air New Zealand into its lucrative regional corners – a move which would require introducing some of Qantas’ Q-400 turbo-props domestically.

Nonetheless, the difference between having three airlines and two competing in a small domestic market is substantial and the short term reduction is much more than arithmetic. Without a Pacific Blue, prepared to sacrifice llions of dollars in the cause of establishing a network operation, there will undoubtedly be a marked shift in market pricing, even if Jetstar does continue to seek market share through lower fares.

Nice to see the a/p market heating up !

The Asia Pacific region has leap-frogged Europe and North America to become the world’s leading aviation market in the first six months of 2010. According to latest sample data from the Airports Council International (ACI), the leading Asia Pacific airports handled close to 500 million passengers in the first half of 2010, up 11.5% over the same period in 2008 (pre-crisis). ACI World Director of Economics Andreas Schimm stated, “North America and Europe remain well behind their respective 2008 pre-crisis levels whereas the other regions have emerged stronger”.

Traffic at the leading European and North American airports fell 7.3% and 7.7%, respectively, over 1H2008, with North America slipping to third place. Growth rates were led by the major Middle East airports, where traffic in 1H2010 was up some 18.4% over the same period in 2008.

Comparative passenger numbers* (mill, year-to-date) by region: Jun-2010 vs Jun-2008

Source: Centre for Asia Pacific Aviation & ACI

Structural change

Asia Pacific's place at the top of the world rankings is confirmed by the latest OAG airline capacity data for Aug-2010 which also shows North America has fallen to third place, with combined domestic and international capacity of 99 million seats, falling behind Asia Pacific with 109.6 million seats, and Europe with 105.5 million this month.

ACI’s Schimm concluded, “Overall, the global industry in the first half was still almost one percent down compared to the pre-crisis period due to the significant declines in the major regions Europe and North America. The impact of the volcanic ash crisis on Europe’s declining 2010 results further exacerbated the slow return of European international traffic to pre-crisis levels, but it does not overshadow the structural change in the markets of the air traffic industry. It is the strong growth in the domestic markets in China and Brazil that have shifted the balance.”

Worldwide passenger demand up 8% in Jun-2010 year-on-year

ACI World reports that “firm passenger demand” brought an 8% year-on-year increase in worldwide traffic growth in Jun-2010, maintaining the “positive momentum” established in the preceding months. International passenger growth contributed strongly with a rise of over 10% and domestic traffic grew by 6%.

ACI noted a “further acceleration” in the Asia Pacific region, “driven notably by international traffic in China, South Korea, Malaysia and Japan.” Growth of more than 20% was reported by Kuala Lumpur, Taipei, Jakarta, Sao Paulo (GRU), Shanghai Pudong and Moscow Sheremetjevo airports in Jun-2010.

ACI total passenger number growth: Jun-2009 to Jun-2010

Source: Centre for Asia Pacific Aviation & ACI

Freight solid

Air freight worldwide continued to grow by over 20% for the seventh month in a row. Jun-2010 results show that major international freight hubs Shanghai, Hong Kong, Frankfurt, Miami, Incheon and Dubai grew by more than 25% compared to 2009.

Comparing to early 2008, total freight tonnage worldwide in the first six months surpassed tonnage shipped in the first half of 2008, the period before the economic crisis took hold. International freight is the driver of this growth, according to ACI, with Asia Pacific and Middle East, up by 4% and 21.5%, respectively. Asia Pacific has further extended its lead in market share to 38% of global air freight tonnage supported by a strong 13% increase in domestic freight traffic, according to the airports body.

ACI total cargo volume growth: Jun-2009 to Jun-2010

Source: Centre for Asia Pacific Aviation & ACI

PARIS - Experts for French prosecutors probing the fatal crash of an Air New Zealand jet in November 2008 have agreed with air safety investigations which partially blame human error.

The experts say responsibility may also lie with two of the three sensors essential for the plane's computerised flying system, but further investigation is needed.

Their report was ordered by public prosecutors probing the crash of the Airbus A320 in which five New Zealanders and two Germans lost their lives off the French town of Perpignan.

The specialists said the plane was flying at too low an altitude to carry out a low speed test, a finding which was separately reached last year by France's air safety board, the Bureau d'Enquetes et Analyses (BEA).

"There was a manoeuvre....at an altitude which was far too low," state prosecutor Jean-Pierre Dreno told the Herald after receiving the report. "Further investigation" is needed with regard to the sensors, he said.

At a press conference in Perpignan, deputy prosecutor Dominique Alzaeri said it could not be ruled out that the 'jamming of the sensors' may connected to cleaning work carried out the day before.

Dreno said no decision had yet been made about any criminal prosecutions as a result of the disaster.

"Lawyers from other parties such as Air New Zealand and other parties involved have been asked to give their points of view," he said. "We are not yet at the stage where we can give an answer to that question."

One of the air safety investigators involved in the crash probe told the Herald that there are many aspects surrounding the crash which need to be examined, including which of the systems were not functioning and the decisions made by the crew. 'It was a test flight checking the low speed alert system at a very low altitude which is not consistent with that type of flight,' he said.

The crash occurred off France's Mediterranean coast at 4:46 pm on November 27 2008. It cost the lives of five New Zealanders and two Germans. They were testing the twin-engine airliner before it was to be handed back to Air New Zealand by XL Airways Germany, a charter company that had leased the craft.

The five New Zealanders were Captain Brian Horrell, 52, from Auckland; engineers Murray White, 37, also from Auckland, Michael Gyles, 49, and Noel Marsh, 35, both from Christchurch; and Jeremy Cook, 58, an airworthiness inspector from Wellington. The German pair were Captain Norbert Kaeppel, 51, and co-pilot Theodor Ketzer, 58, both from the Frankfurt region.

The BEA's preliminary report in February 2009 prompted the introduction of a range of new safety guidelines for non-revenue flights (flights without passengers). The BEA described the critical moments when the plane, flown by two Germans but under the instructions of an Air New Zealand pilot, began a test to assess the plane's recovery from low speed, at an altitude of 3,000 feet (925 metres).

As the speed fell swiftly from 136 knots (238 kph) to 99 knots (173 kph), the craft pitched and rolled violently while an automatic stall warning sounded. Just 96 seconds from the test's start, despite frantic efforts by the German pilot to regain control, the Airbus smashed nose-first into the sea at an angle of 14 degrees at 263 knots (486 kph).

The BEA recommended that prior to such non-revenue flights civil aviation authorities ensure "the qualifications and training of crews" for carrying out such manoeuvres and called for new rules to ensure flight plans and schedules of tests be filed and approved before take off. The report noted that the German crew had not received "any specific training" for the test flight, although the Air New Zealand pilot had undertaken sessions on a training simulator. Many airlines have pilots who are specially trained to conduct test flights after maintenance and are aware of the possible 'glitches' in the plane's operations.

In September 2009 Airbus Industries introduced a new training programme specifically designed to provide additional training for pilots on technical flights.

In January 2009, the A 320's makers, Airbus, issued a safety recommendation to its entire roster of 218 customers. It warned them not to obscure the sensors during paintwork and reminded them that test flights should be conducted safely and low-speed manoeuvres should not be conducted at low height.

Dreno's remarks come a day after a meeting in Perpignan for the parties involved in the tragedy. Among those present were the two judge d'instruction, Perpignan prosecutor Jean-Pierre Dreno, Air New Zealand chief executive Rob Fyfe and the general manager airline operations and safety, Captain David Morgan.

The BEA's final report into the crash is expected to be issued later this year after being reviewed by all interested parties

Some good news !

The probable cause of the 2008 runway overrun of a Continental Airlines 737-500 at Denver International was "the captain's cessation of right rudder input, which was needed to maintain directional control of the airplane, about four seconds before the excursion," the US National Transportation Safety Board concluded yesterday.

The 737-500 en route to Houston Intercontinental veered from Runway 34R while on its takeoff roll, crossed a field and a taxiway, careened down a 40-ft. hill and caught fire after it encountered a "strong and gusty crosswind that exceeded the captain's training and experience," according to NTSB. The captain and five of the 110 passengers onboard were seriously injured in the accident.

Contributing to the Dec. 20, 2008, accident was an ATC system "that did not require or facilitate the dissemination of key, available wind information to…controllers and pilots," the board said. It added that "inadequate crosswind training" by airlines owing to "deficient simulator wind gust modeling" also was a factor.

NTSB said, "The captain's use of tiller and full right control wheel in the 3 seconds before the excursion likely resulted from acute stress stemming from a sudden, unexpected threat, perceived lack of control, and extreme time pressure."

Among other recommendations, the board asked FAA to gather data on crosswinds at various airports including those like DEN "located downwind from mountainous terrain." It said the agency should use the data to develop "realistic, gusty crosswind profiles" for airports and then establish a standard for "empirically embraced, type-specific maximum gusting crosswind limitations for transport category aircraft." FAA should require manufacturers to assign each aircraft type a maximum crosswind standard, NTSB said, adding that in the meantime manufacturers should provide "interim crosswind takeoff guidelines."