Airline Sector: Air NZ Braces For Increase In Qantas Seat Capacity
March 3rd, 2010
After grounding planes in 2009, Qantas CEO Alan Joyce plans to add some 340,000 seats of capacity in the next 12 months. Adding capacity comes as Air NZ’s biggest rival begins a radical re-shape of its fleet, cutting back on First Class seats and spending $A400m upgrading in-flight entertainment and seating. The refit follows Air NZ’s roll-out of new so-called cuddle-class seats which can double as small beds and a push to offer ‘premium’ economy.
Qantas disappointed analysts with a 72% decline in first-half earnings to $A58m, missing estimates, and Joyce highlighted the steady decline in demand for First Class as business passengers trade down. The Sydney-based airline’s best performance came from its low-fare Jetstar unit, where profit almost tripled to $A121m. Qantas withdrew its own-brand planes in NZ in favour of Jetstar. Qantas plans to reconfigure 29 aircraft including eight Airbus A380s on order, which now will feature business, premium economy and economy but no First Class. Nine Boeing 747-400s will get the same treatment.
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How will this impact on Air NZ? The national airline is keen to put its own stamp on new long-haul routes using fuel-efficient planes able to reach into Asia and India. Expect Qantas to aggressively market its new capacity on the already-busy trans-Tasman routes. Air NZ reports its interim earnings on Friday, which will reflect a drop in yields, offset by lower fuel costs. The short-term outlook for earnings remains negative. IATA has estimated the airline industry will lose $US5.6bn this year, an improvement from 2009′s $US11bn of losses.
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