T & L News, March 23, 2016 - The CAPA Centre for Aviation reports that over recent years, Air New Zealand has transformed its long-haul network – and New Zealand’s aviation market – by turning one competitor after another into a joint venture partner. Air NZ’s latest is a revenue-sharing JV with United Airlines, to come into force on 01 July 2016, when United resumes New Zealand services.
The JV follows link-ups between Air NZ and Singapore Airlines, Cathay Pacific and Air China. Yet this is not just another JV: Air NZ-United will be the largest, accounting for 25% of Auckland’s long-haul seat capacity. It will be twice the size of the Air NZ-Singapore Airlines JV. In total, 80% of Air NZ’s long-haul capacity from NZ will be under JV, with the balance in monopoly markets.
Air NZ operates 9% of Auckland’s long-haul capacity without a JV partner. Qantas JV with American Airlines and Emirates account for 7% of capacity, leaving 29% of non-stop long-haul seat capacity from Auckland operated outside of a JV or without Air New Zealand. If Air NZ pursues a partnership with China Southern, or Qantas and China Eastern add New Zealand to their Australia-China JV, non-JV/Air NZ long haul Auckland capacity would fall to 19%. By contrast at Sydney, Auckland’s largest peer, only 36% of long haul capacity is operated under JV. Approximately 85% of capacity in the trans-Atlantic market is operated under JV but under three JV, and not in the way that the dominating force Air NZ does in Auckland.
Regulators are tasked to determine whether this competition elimination is what is needed to survive in end-of-the-line markets. Regulators fear standing up to airlines, which threaten JV rejection with capacity withdrawal. Perhaps unhappy with JV, nevertheless regulators are also politically unwilling to risk the alternative.
On 10 March 2016, Air New Zealand and United announced a revenue-sharing joint venture that will commence 01 July 2016. That is when United resumes service to New Zealand, having exited in 2003 amid bankruptcy restructuring. United will offer three weekly Boeing 787-8 Auckland flights from its main long haul west coast hub at San Francisco. In November 2016, the service will transition to daily, operated by the larger 787-9. A statement from the airlines says they will coordinate schedules, sales and marketing.
