[Anonymous]

[ScottWilson]

Citing route unprofitability, Air NZ is dropping the HKG-LHR leg of its AKL-HKG-LHR service operated by a three class Boeing 777-200ER in March 2013.

http://www.airnewzealand.co.uk/press-release-2012-air-new-zealand-announces-changes-to-hong-kong-and-london-services

The route commenced in 2006, and was operated for a few years by a Boeing 747-400 at the height of the then boom, which saw a big boost in tourism between the UK and NZ. However, the financial crisis, combined with the relative drop of Sterling against the buoyant NZ$, and the rise in APD has seen tourism between the UK and NZ drop significantly.

Meanwhile, Air NZ has struggled to attract UK-HKG O/D traffic with an unatttractive departure time for HKG-LHR (early AM), now exacerbated by the end of the BMI feed at LHR. A couple of years ago it reduced the frequency during northern summers to 3-4x a week, and so has continued to have low yield loadings on the HKG-LHR sector.

Given the prospects for a pickup in demand are low, the 787-9s remain 18 months away and the fact that running AKL-HKG-LHR requires 3 777s compared to just 1 for AKL-HKG, it makes sense to drop the route.

It leaves the AKL-LAX-LHR daily service the remaining Air NZ service to LHR, which survives thanks to very healthy premium loadings from LAX-LHR. However, it does leave Air NZ exposed on connectivity to the UK, as international transit at LAX remains distinctly inferior to transit through any Asian airports.

Curiously, Air NZ also announced a partnership with Cathay Pacific, on the AKL-HKG route, effectively sewing it up to be a monopoly.

[dutchyankee]

This is a real shame, but not surprising I guess. I really wish the traffic was sufficient for BA to fly their own service to AKL again. For a while BA passengers could connect to the QF connection from LAX to AKL, but QF have dropped that route, which really leaves CX connection via HKG and I guess soon the flight with MH via KUL once MH is One World.

[sparkyflier]

I agree it is a great shame, but potentially can they start again once the 787s arrive?

Also, can they use that slot for another routing, for example Shanghai?

Or now that Qantas is leaving LHR-SIN, using A380s, perhaps there is space to go on that route, and a need for competition, the 777s being ideal?

Maybe NZ should not drop the 70 excellent staff, but use some imagination.

[ScottWilson]

I find BA via SIN to SYD remains and will be better in all classes (bar CW) with the 777-300ERs, as the international transfer at SYD is good, and the QF lounges are good too. MH will offer a good OneWorld option to AKL, but unfortunately CX HKG-AKL is operated by A340s, which neither will have the new C Class, nor have premium economy (or the non-hard shell Y class).

Agree the 787s may see NZ look at the route again, especially if it can get an early AM LHR arrival slot (unlikely). However, NZ plans on replacing its 767s first with 787s before opening new routes. NZ’s AKL-PVG route is already downgauged seasonally to a 767, which doesn’t have the PE or the lie flat C product. It wouldn’t extend this route to LHR without 787s. SIN wont happen. Insufficient feed at SIN, SQ’s 2-3 daily flights have the business traffic sewn up. Unless NZ started being seriously generous with its FFP for SQ FFs to take it head on, I doubt there is any chance it could get decent premium traffic to make it worthwhile tying up 2 777s.

[canucklad]

I’m afraid i’m going to predict this will just be the start of a few star alliance airlines at LHR reviewing their operations downward, and thus reducing competition and choice.

The only way to stop the slide is for Virgin to get their finger out , join star and start their domestic feeder flights.

They are already moving towards a hub stragety

http://www.bloomberg.com/news/2012-10-24/branson-trials-hub-model-as-virgin-links-bollywood-to-5th-avenue.html

[superchris]

Canucklad – its a great point. One wonders how much the demise of BMI and the loss of feeder traffic has contributed to this. My prediction is that Air Canada will be the next to down size at LHR………

[canucklad]

Superchris……yep,…. i agree….. they would be prime candidates, and i suspect as they downsize at LHR they will potentially increase operations at FRA and use LH as their feeder airline from the regions and Scotland.

SQ have also probably seen a loss in their kangaroo route!!
and what do UA do next…

I suppose that is what happens when you create a virtual monoply by allowing BA to purchase without putting into place sufficient rules to stop monopolistic behaviours.

[AMcWhirter]

Canucklad – it’s easy to underestimate the importance of Bmi to fellow Star carriers at LHR when it comes to feeder traffic.

Maybe that’s also one of the reasons (the other reason, of course, is competition from the Gulf airlines) that TG downgraded to a smaller aircraft for its x 2 daily LHR-BKK service.

Difficult to draw the same conclusion with SQ because it also flies from MAN and that airport has a wide catchment area ranging from the West Midlands in the south to Scotland in the north thanks to motorway and rail links.

In any case, when Bmi ditched its GLA-LHR service a year or so back, SQ was quick to tie-up a feeder deal with BA and SQ fares increased by only a small amount.

[ScottWilson]

SQ has increased its frequency to LHR to 4x most days. Safe to say it hasn’t been affected.

NZ has a substantial long standing interline agreement with BA at LHR on many routes to Europe, so I wouldn’t OVERestimate the importance of BMI here. NZ’s connections at LHR are as much with BA/EI as they are with LH group carriers and KLM in fact.

It is perhaps more reflective of QF’s moves, having itself dropped HKG-LHR and two of its four daily LHR services earlier this year. The economics of two hop ultra long haul routes are dependent on decent premium loadings for both hops. Air NZ hasn’t had that for the HKG-LHR leg since the big drop in UK-NZ tourism traffic.

[Cedric_Statherby]

Canucklad

The point about the value that other Star Alliance airlines derived from BMI that you and others highlight is a good one. And I can see that Air NZ may no longer have enough business to run both a LHR-via-USA and a LHR-via-Asia routing.

What puzzles me a bit though is why, of the two onward legs to Europe, they would drop the HKG-LHR one. Asia is a faster growing aviation market than west coast USA, and speaking personally, I detest flying through the USA to a non-US final destination and will go to elaborate lengths to avoid doing so. Any insights?

[Henkel.Trocken]

I know there is a perception that TG have downgraded their LHR offering by replacing 2x744s with 2xA346s, I’m not sure that’s true though.

The A346 has two less F seats than the 744, IME an average of seven were filled so the eight on the A346 are sufficient.

It has about twenty more C seats, all C seats were filled on the 744 and it seems that almost all C seats are full on the A346.

There are significantly less Y seats on the A346. TG have stated that it is not their intention to compete on the kangaroo route with the gulf carriers for Y pax so reducing Y LHR-BKK would seem like part of that strategy.

This could be smart revenue management from TGs point of view, something they have not always been noted for.

I’m not sure the demise of BD will have affected *A carriers so much. Remember that BD did not for many years interline bags where two tickets were used and that would be almost always for cheap tickets. BA now have to offer interline fares to *A carriers so for premium travel I doubt much has changed.

SQ have recently expanded their offering knowing of the demise of BD, I’m sure given their revenue management they took this into account before increasing their offering by about 20%.

NZ have struggled with the LHR-HKG sector almost since the start. It was introduced because NZ percieved they were losing revenue because of the LAX transit experience and they probably where. The trouble is there are far more options for an eastbound trip and their 772 which doesn’t have their latest products isn’t the best on the route by far so in hard times, no real surprise that it has been pulled. Like QF, they see that there are greater gains by expanding in Asia than there are keeping old links to LHR alive.

[ScottWilson]

One report indicated that the cost of operating AKL-HKG-LHR was 10% higher than AKL-LAX-LHR, due to higher airport charges at HKG compared to LAX, and the cost of overflight levies for Russia.

Add to that poorer yields on HKG-LHR (as NZ does very well from Business Premier and Premium Economy on LAX-LHR O/D traffic) and it just wasn’t sustainable.

The loss of business from those who don’t like the LAX transit experience isn’t enough to outweigh the savings from dropping the route and redeploying assets.

[AnthonyDunn]

Gents: an explanation for the uninitiated…. O/D?

[dutchyankee]

Origin/Destination traffic, meaning local traffic at either end.

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