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Why Doesn't NZ Re-enter The SYD-LAX Market?  
User currently offlineZKNBX From New Zealand, joined Jul 2006, 464 posts, RR: 0
Posted (7 years 9 months 3 weeks 2 days 19 hours ago) and read 5371 times:

Given that SYD-LAX is one of the most profitable routes in the world, and given that SQ and EK among others, have been chomping at the bit, to get their hands on SYD-LAX... it seems highly odd that

NZ have 744s spare (literally sitting around) and
NZ are not exercising their rights to operate the route.

There has been much discussion about NZ leasing 744s to Air India, and other carriers. This has yet to eventuate, and NZ 744s are now on wet-lease to the Singapore military this month.... flying charters back and forth between SIN and Rockhampton. Latest rumours are that NZ 744s will be based in Europe, on lease.... (BUT NZ just spent tonnes of money refitting the 744s)

Now the QF - NZ tie-up is definitely off the agenda, and while NZ have the superior product, would seem the ideal time to me, for NZ to re-enter that market.... rather than waiting for competitors to establish a market presence.

Fyfe says it will be October 2007 before another new destination... (likely to be AKL-PVG-MUC or AKL-PVG-FRA) and there is now an expectation the 77W will enter the fleet within 5 years to replace the 744. So what gives? Why did they spend the money on the refit? What are the chances of the 744 re-entering the SYD-USA market?

29 replies: All unread, showing first 25:
 
User currently offlineTG992 From New Zealand, joined Jan 2001, 2910 posts, RR: 10
Reply 1, posted (7 years 9 months 3 weeks 2 days 18 hours ago) and read 5352 times:

None, given that if they did, UA would re-enter AKL-LAX.

Another reason is that NZ can't offer the domestic connections that UA and QF can. This made us unattractive as an option at both ends. The new longhaul product has also added a considerable amount of weight to our B744s. We would only be able to carry around 320 pax on on this sector (capacity 393), making it uneconomical to fly.

(BTW, Qantas and United Airlines both have different operating rules and onboard products than we do which allows them to carry more payload. This is why those airlines are able to effectively fly SYDLAX)



-
User currently offlineAirCanada014 From Canada, joined Oct 2005, 1513 posts, RR: 0
Reply 2, posted (7 years 9 months 3 weeks 2 days 18 hours ago) and read 5330 times:

If and when Canada and Australia reach their agreement AC will be able to fly YYZ-LAX-SYD and when they do UA, NZ along with US will be able to codeshare on AC's flight from LAX-SYD portion.

User currently offlineVHVXB From Australia, joined Apr 2006, 5524 posts, RR: 18
Reply 3, posted (7 years 9 months 3 weeks 2 days 18 hours ago) and read 5316 times:

Quoting ZKNBX (Thread starter):
EK among others, have been chomping at the bit, to get their hands on SYD-LAX... it seems highly odd that

when did EK ever say they were interested in flying to the US from Aust?
http://www.theaustralian.news.com.au...ory/0,20867,20588293-23349,00.html

[Edited 2006-11-12 05:55:09]

User currently offlineETA Unknown From Comoros, joined Jun 2001, 2077 posts, RR: 0
Reply 4, posted (7 years 9 months 3 weeks 2 days 2 hours ago) and read 5053 times:

NZ was always the last to fill up on SYD-LAX. There was also significant AN feed- now that's gone, the service would be even more difficult to operate.

As for the 747 lease on ZK-SUH, please remember the lease renewal terms on this particular aircraft were ***extremely*** generous and NZ can still make a profit operating this aircraft even if it means leasing it out.


User currently offlineKoruman From , joined Dec 1969, posts, RR:
Reply 5, posted (7 years 9 months 3 weeks 2 days 1 hour ago) and read 5009 times:

UA would never return to LAX-AKL under any conditions: they reported that it was too low-yield and a waste of a 747.

Air NZ's 747-400 was and is too big to operate SYD-LAX without domestic Australian feed. But a 777-200ER would be fine if it had more premium and fewer economy seats (say 46 Business / 40 Premium Economy / 180 Economy for a total of 266 seats). This would not only optimise yield but would also maximise payload for the long sector.

Moreover, the afternoon A320 aircraft flying AKL-BNE could actually operate AKL-BNE-SYD-AKL to provide feed from BNE to SYD if needed.

No, the only real reason why Air NZ is not operating SYD-LAX with 777s and intending to operate MEL-LAX and BNE-LAX with 787 aircraft is because it is afraid of threatening Qantas and jeopardising its fantasies of bondage with QF.


User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9612 posts, RR: 52
Reply 6, posted (7 years 9 months 3 weeks 2 days 1 hour ago) and read 4989 times:

If NZ operated LAX-SYD, they wouldn't have Australian feed, and the feed from LAX is limited since United passengers would probably be continuing on United's flight rather than go through the hassle of switching to terminal 2 and changing airlines even though NZ offers a superior product in both business and economy class. There would be little feed from Air Canada since they already fly to SYD. HP/US feed is pretty minimal.

Quoting Koruman (Reply 5):
UA would never return to LAX-AKL under any conditions: they reported that it was too low-yield and a waste of a 747.

Never is a strong word. I think it is possible that UA could return to LAX-AKL or start SFO-AKL. It doesn't seem very imminent, but it is possible.

Quoting Koruman (Reply 5):
Moreover, the afternoon A320 aircraft flying AKL-BNE could actually operate AKL-BNE-SYD-AKL to provide feed from BNE to SYD if needed.

What would that accomplish? NZ already has 5 daily SYD-AKL flights, and can feed its flights to SFO and LAX with connections from Australia.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineKoruman From , joined Dec 1969, posts, RR:
Reply 7, posted (7 years 9 months 3 weeks 1 day 21 hours ago) and read 4856 times:

What it would accomplish is ensuring that there was feed on NZ metal from BNE to SYD for the SYD-LAX flight. It would replace on of the daily SYD-AKL flights.

Similarly, the morning AKL-SYD A320 would continue up to BNE to drop off arrivals from the LAX-SYD service, before flying back to AKL from BNE.

That effectively increases the market from 4 million Sydney residents to 6 million Sydney and south-east Queensland residents. MEL already has 1 stop flights to LAX via AKL on NZ 5/6, this would reproduce the situation for BNE.

I may sound like simpilicity, but I'm not!


User currently offlineN1120A From United States of America, joined Dec 2003, 26444 posts, RR: 75
Reply 8, posted (7 years 9 months 3 weeks 1 day 20 hours ago) and read 4776 times:

Quoting Koruman (Reply 5):
UA would never return to LAX-AKL under any conditions: they reported that it was too low-yield and a waste of a 747.

The problem wasn't so much yields per se, it was a combination of yields and load factors. Since the United 772ERs don't have the range to do the route with a profitable enough payload to support the operational need, United dropped it. If United were to ever go back to AKL, it would behoove them to run from both LAX and SFO

Quoting Koruman (Reply 5):
Moreover, the afternoon A320 aircraft flying AKL-BNE could actually operate AKL-BNE-SYD-AKL to provide feed from BNE to SYD if needed.

There is a little problem of cabotage, unless NZ can operate Australian domestic services



Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9612 posts, RR: 52
Reply 9, posted (7 years 9 months 3 weeks 1 day 20 hours ago) and read 4757 times:

Quoting N1120A (Reply 8):
Quoting Koruman (Reply 5):
Moreover, the afternoon A320 aircraft flying AKL-BNE could actually operate AKL-BNE-SYD-AKL to provide feed from BNE to SYD if needed.

There is a little problem of cabotage, unless NZ can operate Australian domestic services

I believe Air New Zealand can operate domestically in Australia just as Qantas operates domestically in New Zealand. Air New Zealand had a controlling interest in Ansett Australia. New Zealand and Australia have very liberal regulations. Any airline can operate between the two, which is why there are so many airlines flying AKL-SYD.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineKoruman From , joined Dec 1969, posts, RR:
Reply 10, posted (7 years 9 months 3 weeks 1 day 20 hours ago) and read 4757 times:

Just to clarify, it is not cabotage: Air NZ has full rights to operate domestic services in Australia.

Two weeks ago I was seated on an Air NZ 777 Trans-Tasman behind Maurice Williamson, whose handling of the cabotage debacle in 1994 led to the Ansett investment. I was surprised he still travels Air NZ after the consequences of that. But yes, air NZ eventually ended up with full rights to carry passengers

1) To Australia.
2) Within Australia (whether foreign or Australian passengers).
3) Through and beyond Australia.
4) From Australia to New Zealand.
5) From Australia to any other country.

The idea of the Ansett mess was partly to exercise those rights from Australia long-haul to elsewhere, but Air NZ was so busy protecting AKL-LAX that it neglected Ansett's SYD-LAX and lost Ansett, and with it in turn the domestic feed for SYD-LAX on Air NZ.

But 777s are smaller than the 747s, and could operate MEL-LAX and SYD-LAX without feed, and 787s could operate PER-BNE-LAX, SYD-SFO and MEL-SFO.

And there's a lot more potential for growth there than on China-NZ.


User currently offlineN1120A From United States of America, joined Dec 2003, 26444 posts, RR: 75
Reply 11, posted (7 years 9 months 3 weeks 1 day 20 hours ago) and read 4750 times:

Quoting Koruman (Reply 10):
Just to clarify, it is not cabotage: Air NZ has full rights to operate domestic services in Australia.

Well, it is cabotage, they are just legally able to do it.

Quoting Koruman (Reply 10):
But 777s are smaller than the 747s, and could operate MEL-LAX and SYD-LAX without feed

The problem becomes that NZ would be at a significant CASM disadvantage to United and Qantas.



Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
User currently offlineAerohottie From Australia, joined Mar 2004, 801 posts, RR: 3
Reply 12, posted (7 years 9 months 3 weeks 1 day 19 hours ago) and read 4687 times:

Quoting N1120A (Reply 11):
The problem becomes that NZ would be at a significant CASM disadvantage to United and Qantas.

I'm not too sure how much of an issue that would be considering NZ's much lower operating costs compared to QF and UA esp. Really wouldn't surprise me if NZ could operate a 772ER with lower CASM than a 744 of QF or UA.



What?
User currently offlineN1120A From United States of America, joined Dec 2003, 26444 posts, RR: 75
Reply 13, posted (7 years 9 months 3 weeks 1 day 19 hours ago) and read 4687 times:

Quoting Aerohottie (Reply 12):
I'm not too sure how much of an issue that would be considering NZ's much lower operating costs compared to QF and UA esp. Really wouldn't surprise me if NZ could operate a 772ER with lower CASM than a 744 of QF or UA.

A similar comparison would be Southwest competing on a route with United where Southwest flew a 73G and United a 752. Though Southwest has lower costs overall, hte 752's nominal CASM advantage would more than make up for that.



Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
User currently offlineTonyBurr From United States of America, joined Mar 2001, 1031 posts, RR: 0
Reply 14, posted (7 years 9 months 3 weeks 1 day 19 hours ago) and read 4668 times:

I am not sure about some of the comments here. As to the NZ product vs the UA, NZ C is I think far superior. As to changing terminals in LAX, I would do it for the superior product. As to feed in SYD, what feed dooes UA have, yet it seems to go out full alot. So I am not sure why NZ does not get in the market.

User currently offlineSunriseValley From Canada, joined Jul 2004, 4957 posts, RR: 5
Reply 15, posted (7 years 9 months 3 weeks 1 day 19 hours ago) and read 4655 times:

Quoting N1120A (Reply 11):
The problem becomes that NZ would be at a significant CASM disadvantage to United and Qantas.

Maybe, but with the potential yield's from the seating layout that Koruman has outlined this is probably not too relevant.
In the "Flight" article Fyfe claimed that NZ was saving $NZ62million a year in fuel by using the -200ER's over the -400's on the AKL-LAX-LHR route. If you don't have the payload then what sense is there in putting excessive capacity on the route?. When you take the load factor times the number of premium seats on the -400 and subtract from the resulting number; the count of premium seats on the -200ER , the lost revenue is not all that great. Probably not close to $NZ62 million!
Probably just a coincidence, but NZ's load factor with the -400 on the AKL-LAX-LHR route is about 80% which gives a seat occupancy right around the 313 seats of their -200ER's.


User currently offlineChiGB1973 From United States of America, joined Mar 2004, 1615 posts, RR: 1
Reply 16, posted (7 years 9 months 3 weeks 1 day 19 hours ago) and read 4638 times:

Quoting ZKNBX (Thread starter):
Given that SYD-LAX is one of the most profitable routes in the world

Add supply, decrease demand, decrease yields. It works in some cases, not in others as far as breaking even or making a profit. Of course, I have no idea how much and it might still be profitable, but the idea that, one guy is making money at it, I can too, is just that, an idea.

M


User currently offlineKiwiflyer791 From New Zealand, joined Oct 2005, 128 posts, RR: 0
Reply 17, posted (7 years 9 months 3 weeks 1 day 18 hours ago) and read 4577 times:

Basically our aircraft are now just to dammed heavy to operate this service now. The upgrade added a huge amount of extra weight to the planes and operating SYD-LAX with a reduced payload just doesn't make sense.

User currently offlineQantasA380 From Australia, joined Apr 2005, 212 posts, RR: 2
Reply 18, posted (7 years 9 months 3 weeks 1 day 18 hours ago) and read 4479 times:

I know that SYD-AKL-LAX isn't the same as SYD-LAX, and I'm not sure if it still works like this now, but a couple of years ago there were NZ flights from BNE, SYD and MEL planned to arrive in AKL in time for a reasonably quick connection to LAX, and the same in return. The outbound flight from SYD left around 11am, IIRC, and there was around 60-90 minutes connection time in AKL...


Virgin Blue - what colour's RED????
User currently offlineZK-NBT From New Zealand, joined Oct 2000, 5319 posts, RR: 11
Reply 19, posted (7 years 9 months 3 weeks 1 day 17 hours ago) and read 4426 times:

Quoting QantasA380 (Reply 18):
I know that SYD-AKL-LAX isn't the same as SYD-LAX, and I'm not sure if it still works like this now, but a couple of years ago there were NZ flights from BNE, SYD and MEL planned to arrive in AKL in time for a reasonably quick connection to LAX, and the same in return. The outbound flight from SYD left around 11am, IIRC, and there was around 60-90 minutes connection time in AKL...

Sure is, NZ offer NZ5/6 as a MEL-AKL-LAX service, sometimes with a change of aircraft in AKL.

I think yeild is the problem for NZ to return to SYD-LAX even with a 777, and the lack of domestic feed into SYD.


User currently offlineZKNBX From New Zealand, joined Jul 2006, 464 posts, RR: 0
Reply 20, posted (7 years 9 months 3 weeks 1 day 17 hours ago) and read 4412 times:

I'm also not sure about some of the coments here... there seem to be a rash of assumptions underpinning a lot of the talk above.

Air NZ could form an alliance with Virgin Blue... there are new rumours of cooperation on the other side of the Tasman.

QF is seriously loosing money in NZ via their Jetconnect operation because they don't have adequate feed. NZ can solve this via an interline with Virgin Blue on the other side of the ditch... QF have no such options here in NZ now.

Regardless of whether you accept or don't accept the suggestions of cooperation with Virgin Blue, QF have sucessfuly maintained operation between NZ and the United States (via AKL) despite a lack of presence in the NZ domestic market. Why? Becuase they have a solid product and fly the Tasman comprehensively. They also link with other Oneworld Alliance members (LA & CX) via AKL... and AA via LAX

Australia - and in particular its East coast cities of MEL and SYD - are all significantly larger than AKL in terms of population concentration. Therefore, I cannot see the logic in NZ NOT exercising its rights out of Australia. NZ could be flying AKL-SYD-HKG, AKL-MEL-HKG and AKL-BNE-HKG (to feed HKG-LHR service); similarly there is surely room for NZ to offer nonstop service between Australia and the USA, just as QF do from Australia via AKL to LAX. If not with 744, NZ could use a reconfigured 777 with larger Premium and PPE cabins. It seems as if NZ are surrendering their rights (literally standing aside) if they allow AC to enter the LAX-Australasia market, and likely adding the nail in the coffin of their HNL route to boot...

In short, I still don't understand why NZ don't leverage off their rights out of OZ because no other airline has or can get those rights out of Australia. QF have scant presence in NZ domestic market now... yet they still attract patronage between AKL and LAX... NZ could have the same or greater success via Australia.


User currently offlineCurmudgeon From Australia, joined Oct 2006, 695 posts, RR: 22
Reply 21, posted (7 years 9 months 3 weeks 1 day 16 hours ago) and read 4357 times:

Quoting ZK-NBT (Reply 19):

I think yeild is the problem for NZ to return to SYD-LAX even with a 777, and the lack of domestic feed into SYD.

I think that future yields are very much the problem, but not because of connections. NZ already serves most of the other major centres anyway via AKL, and there aren't many regional cities with a notable population in Australia.

Yields will become critical in three years or so when the A380 replaces some QF 744's on the route, and AC and JQ services are established. By that time fares will approach commodity pricing levels, and nobody will be getting fat.



Jets are for kids
User currently offline777ER From New Zealand, joined Dec 2003, 12114 posts, RR: 18
Reply 22, posted (7 years 9 months 3 weeks 1 day 15 hours ago) and read 4304 times:
AIRLINERS.NET CREW
FORUM MODERATOR

Quoting RoseFlyer (Reply 9):
Quoting N1120A (Reply 8):
Quoting Koruman (Reply 5):
Moreover, the afternoon A320 aircraft flying AKL-BNE could actually operate AKL-BNE-SYD-AKL to provide feed from BNE to SYD if needed.

There is a little problem of cabotage, unless NZ can operate Australian domestic services

I believe Air New Zealand can operate domestically in Australia just as Qantas operates domestically in New Zealand. Air New Zealand had a controlling interest in Ansett Australia. New Zealand and Australia have very liberal regulations. Any airline can operate between the two, which is why there are so many airlines flying AKL-SYD.

The reason why NZ purchased 50% of AN was because of the Australian Government and backing out of its fair share of the NZ/OZ agreement

Quoting ZKNBX (Reply 20):
Air NZ could form an alliance with Virgin Blue... there are new rumours of cooperation on the other side of the Tasman.

Read that in Wellingtons main paper on saturday, in a very nice article on NZ, QF and DJ. Apparantly back in 2002 DJ apprached NZ, while NZ and QF were holding talks about code-sharing


User currently offlineAerohottie From Australia, joined Mar 2004, 801 posts, RR: 3
Reply 23, posted (7 years 9 months 3 weeks 17 hours ago) and read 4083 times:

Quoting 777ER (Reply 22):
Quoting ZKNBX (Reply 20):
Air NZ could form an alliance with Virgin Blue... there are new rumours of cooperation on the other side of the Tasman.

Read that in Wellingtons main paper on saturday, in a very nice article on NZ, QF and DJ. Apparantly back in 2002 DJ apprached NZ, while NZ and QF were holding talks about code-sharing

I'm not sure if I could see NZ working with DJ or not....



What?
User currently offlineKoruman From , joined Dec 1969, posts, RR:
Reply 24, posted (7 years 9 months 3 weeks 13 hours ago) and read 3996 times:

Fyfe's argument about saving $62 million per year on fuel by flying AKL-LAX-LHR with a 777 instead of a 747 reveals just how little he understands about yields.

Every day all 4 sectors now have 20 fewer Business Class seats and 13 fewer Premium Economy seats. If we assume 80% loads, that is a total of 64 fewer Business Class sectors sold per day and 40 fewer Premium Economy sectors sold per day.

If we then assume a median per sector fare (e.g. AKL-LAX or LAX-LHR) of $2000 in Business class and $1000 in Premium Economy, the switch to the 777 is costing $128,000 per day in lost Business Class revenue and $40,000 per day in lost Premium Economy revenue. That is almost $170,000 per day in lost revenue, or $1.2 million dollars per week, or the same $62 million dollars per year - and that is without factoring in Economy Class losses too, and the effects of losing premium customers on LHR-LAX to British Airways and Virgin Atlantic, and LAX-AKL passengers to Qantas.

In short, Fyfe can claim to be saving $62 million on his fuel bill, and spin it to impress his shareholders, but his lost yield is much more than the $62 million.

As usual, short-term cost-cutting to prepare for selling off the airline.

If he really wanted to make his 777 work, he should have kept the same 46 Business and 31 Premium Economy that the 747 has, and just ripped out low-yield Economy seats. But the refit would have cost money in the short-term, and we wouldn't want to do that, would we?


25 Aerohottie : Koruman - I agree, the emphasis should be on growing the number of passengers travelling on the airline, not just manipulating passenger flows from LA
26 Nzrich : Also depends on a lot of factors 1 how many business class passengers have paid for the seat 2 how many have now changed to travelling via HKG to LHR
27 Koruman : Firstly, the changes to Airpoints mean that almost all Business Class passengers have paid for their seats: on AKL-LAX-LHR the airline no longer even
28 Nzrich : As for transiting HKG i would prefer the 2 hour transit there than at LAX ..Also from talking to the NZ passengers for nearly 8 years now passengers
29 Koruman : The Japan routes are worse than marginal, which is why 2 have already been axed and the other 2 should be, and probably will be. Anyone flying from Au
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