Air NZ and Virgin Australia plan product integration

Seats to Suit puzzle piece.jpgAir New Zealand is planning for its four-tiered “Seats to Suit” product and fare structure to serve as the model of its integrated product offering with trans-Tasman joint-venture partner Virgin Australia.

“While the product names might be different, the range of product offerings will be relatively similar between the two airlines,” ANZ chief executive Rob Fyfe says in Auckland. “The goal of the joint-venture is to strive for product alignment.”

Fyfe’s remarks come as Virgin Australia is finalising its new domestic offering that will likely be a three-tiered structure comprising a basic economy seat offering, economy seat with a meal, and business class, according to sources familiar with the matter.

ANZ last year introduced to Airbus A320 flights from New Zealand to Australia and Pacific Islands its Seats to Suit offering with four branded fare types increasing in cost.  ”Seat” includes hand luggage only, “Seat+Bag” includes checked luggage, “The Works” includes checked luggage and a meal, and “Works Deluxe” includes two checked bags, a meal, premium perks including lounge access, and a guarantee to have an empty adjoining seat.

Fyfe expects the joint-venture, which was approved last December, to commence around July, at which time there will be a “significant number of things that we have already identified we will be able to get alignment with”.

Although he does not disclose what will be integrated initially, he says in-flight entertainment alignment will take some time to achieve. ANZ”s A320 fleet features Panasonic’c on-demand X series while Virgin Australia is yet to announce what its new in-flight entertainment platform will be.

Fyfe is steadfast that until ANZ and Virgin have an integrated product, the carriers must communicate to passengers what product they will experience on board.

“What will be absolutely critical is to make sure people understand when they bought their ticket what aircraft type they’re flying on and making sure people understand the operating carrier and any product differences they’ll experience,” Fyfe says. “And then overtime we will be expecting to align the product.”

Seats to Suit has been “performing far better than we expected” Fyfe said in ANZ’s report to the six months to December 2010. Bookings on Tasman and Pacific Island services increased 15% since it introduced Seats to Suit, but ANZ says yields deteriorated by 1.5% as a result of associated discounting.

In addition to some product alignment at the start of the alliance, ANZ and Virgin expect to re-time their schedules to eliminate instances where they each operate the same service within a half hour of each other, according to local reports. They are also looking to space out less frequent routes and are evaluating new trans-Tasman routes. 

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