Air New Zealand is launching a new route from Christchurch to Perth, aiming to cater to the growing number of New Zealanders employed in the mining industry in Western Australia, according to CEO Nikhil Ravishankar.
This development is part of the airline’s recent announcement of three new international routes from Christchurch, including flights to Singapore, Tokyo, and Perth. This announcement follows a decision made three weeks prior to reduce services on regional routes.
During his appearance on RNZ’s Nine to Noon programme, Ravishankar explained that the new routes are financially viable given current fuel prices, although their continuation will depend on future fuel costs.
Addressing concerns over service reductions elsewhere, Ravishankar clarified that the cuts have not been limited to domestic routes.
“We’ve had to consolidate flights across our entire network to mitigate the impact of the fuel price shock. Nonetheless, we are seeing signs of growth. The much-discussed engine issues are improving, and we’re optimistic about the future.
“Tourism plays a crucial role in New Zealand’s economy, and as I often say, we must be able to manage multiple priorities simultaneously.”
Ravishankar is enthusiastic about the new routes, stating that they will directly link the South Island to key tourism and trade markets, benefiting both inbound and outbound travel.
Despite the high fuel costs, expanding these international routes remains a sensible decision, he noted.
“Given the current fuel price market, we believe expanding these routes is logical. However, we are aware that fuel prices are volatile, and we will reassess if they exceed certain thresholds. But as long as prices remain within the current range, these decisions are sound.”
He expressed hope for an end to the crisis and a return to normal fuel prices.
Ravishankar emphasized that profit isn’t the sole factor in launching new services.
“Our network planning involves multiple considerations. Demand is a significant factor, but we also focus on ensuring long-term connectivity.
“We evaluate short-term demand and supply, long-term forecasts, and collaborate with stakeholders in trade, tourism, and business travel to ensure our network aligns with our mission to connect New Zealanders and link New Zealand to the world.”
He anticipates strong inbound demand from the United States, Asia, and other regions, with New Zealand being a top travel destination for many.
“There’s a strong desire to visit us, which is a positive challenge. While demand is robust, we are approaching the shoulder season from August to October, when it typically dips before picking up again for the summer peak.”
Ravishankar attributed part of the demand to currency exchange rates.
“American visitors find good value for money here, and similarly, travel to Japan is appealing for us as the New Zealand dollar stretches far there.”
In contrast, outbound demand from New Zealand and domestic travel show signs of weakness.
The new Perth route is designed to accommodate the travel needs of New Zealanders working in Western Australia’s mines, who typically follow a two-week on, two-week off schedule. This market has now surpassed the densely traveled Brisbane/Sydney/Melbourne corridor.
“We’re witnessing an increasing number of Kiwis employed in the Western Australian mining sector, and this route facilitates their commute,” Ravishankar said.
When asked about the potential impact on Pacific routes, Ravishankar assured that his team is striving to prevent any route cancellations. Instead, the focus is on managing flight frequency to avoid operating half-empty planes and wasting fuel.
“Our consolidation efforts are centered on conserving fuel. We only consolidate flights with already low demand.
“We’ve reduced flying by up to 5 percent domestically across both short-haul and long-haul networks. As we enter the shoulder season, we’re examining potential frequency reductions in the Pacific, but eliminating routes is not on the agenda.”
Looking forward, Ravishankar acknowledged the volatile and uncertain landscape.
“As we consider a strategic reset, we evaluate aviation’s significance to New Zealand, which is considerable. Our country is sparsely populated with varied terrain, contributing to one of the densest domestic networks globally. We operate in 20 ports across New Zealand, and our geographical isolation underscores the importance of aviation.
“I often illustrate to my European and American colleagues that a 2000km radius around Auckland doesn’t reach Australia’s east coast, whereas the same radius around Berlin covers much of Europe and beyond.
“Contrary to popular belief, we’re not as closely situated to Australia as it seems. Aviation is vital for us, and there’s a need for a world-class airline, which we are committed to building.”
Upcoming Announcement on Further Cuts
Regarding future cost pressures, Ravishankar indicated that prices for spare parts are expected to rise, with fuel costs linked to the Middle East conflict. Another round of domestic consolidation will be announced soon.
He refuted claims that regional areas disproportionately bear the impact of cuts, asserting that reductions are comparable across cities, the Pacific, and North America.
“We’re working to minimize disruptions, providing early signals about our network plans and ensuring passenger accommodations on the same day even as we make further consolidations.”
No fare increases are anticipated from August to October.
“Affordability is a significant concern. We can’t raise fares in many markets, which is why we’re recovering only 40 percent of the increased fuel costs through consolidation.”
Ravishankar remains optimistic about the airline’s return to profitability, despite a projected loss this year.
“We’ll share more details as we unveil the new strategy and engage with stakeholders. We’re a few months away from providing more insights.”
He praised Air New Zealand’s world-class tourism offerings.
“Demand for our services is high. As a trading nation, many of us fly frequently, and our exporters rely on air freight to reach key markets. The future is promising, and we’re optimistic about it. Nonetheless, we recognize the volatility, so our strategy focuses on building resilience within the airline.”
