In a move to cut costs on the unprofitable New Zealand-Australia routes across the Tasman, Air New Zealand (ANZ) is proposing to integrate operations with its low-cost subsidiary, Freedom Air.

Trans-Tasman yields have fallen 25% in the past two years, complains Rob Fyfe, ANZ’s group general manager of airlines. Mostly he blames this on “capacity dumping” by Middle Eastern and Asian carriers that operate fifth freedoms across the Tasman. Departing ANZ chief executive Ralph Norris said in June that a “radical new approach” was needed on these routes to stem losses.

The decision to replace Freedom Air’s fleet of Boeing 737-300s with new Airbus A320s prompted ANZ to conclude that it could cut its own trans-Tasman costs by 10% if it merged Freedom’s four A320s and its own nine A320s into one fleet.

ANZ is now conferring with its unions on a plan to place all A320s in a common pool under one operating certificate, with the 13 jets flown across the Tasman by flight crews from both carriers. Ground handling, maintenance, supply contracts and back office operations would also merge. ANZ also proposes that all new A320 pilots and cabin attendants would be hired by Freedom Air at its lower rates. ANZ does not propose to lay off or cut salaries or benefits for any of its own A320 staff. Labour costs would fall as Freedom Air flightcrews gradually replaced ANZ crews through natural attrition.

Freedom Air will keep its brand and its own in-flight services under this plan, but it will add business class to its A320s. Freedom’s new jets are all due for delivery before the end of this year. All ANZ and Freedom Air A320s would then have the same seat configuration and interiors.

Source: Airline Business