New Air Alliance looks to make New Zealand a hub between Asia and South America
Analysts at the Capa Centre for Aviation say Air New Zealand is reviewing options for covering South America, now a focus of this country’s tourism push.
Commenting on the report, an airline spokeswoman said “South America is an area we’ve been interested in exploring for some time, but the first priority has been to finesse our Southeast Asia and Europe networks.”
Air New Zealand chief executive Christopher Luxon has said South America was now an obvious white space on the airline’s network.
“However, it is one that would require considerable due diligence work to establish whether the economics of flying this route would be viable,” the spokeswoman said.
The Capa report said looming withdrawal from the Buenos Aires-Sydney route by the pioneers of the Southern Polar Route, Aerolineas Argentinas that could leave an opening for Air New Zealand as OneWorld partners Qantas and Chilean airline LAN left as the only carriers flying between Australasia and South America.
Air New Zealand’s proposed alliance with Singapore Airlines – a deal that could be done by the end of the year – could be well extended to Latin America, providing feed for a potential new route which would otherwise not be viable.
“Air NZ has been eager for some time to exploit New Zealand’s position between Asia and South America and connect an underserved and fast-growing market. Likewise, Auckland Airport has envisaged itself as a potential hub for the connections. There is still no easy other solution for Air New Zealand,” said Capa.
Air New Zealand has been mulling over South America for several years, and dipped its toe with a successful rugby charter flight to Argentina in 2012, but the economics have proved too challenging, even though new fuel-efficient planes added to its fleet make the region more accessible.
Latin America has been identified as an emerging market that offers significant growth potential for tourism in New Zealand. In the 2013/14 Budget the Government announced an additional $123 million in funding for Tourism New Zealand over four years, with $44.5 million tagged specifically to attracting visitors from emerging growth markets.
Research into the Latin American markets of Argentina, Brazil, Chile and Mexico revealed Brazil offers the most opportunity. The trade push into the region was given impetus in the mid-1990s with an MFAT-developed Focus Latin America programme.
Singapore Airlines serves Sao Paulo in Brazil via Barcelona, but Capa said it could instead use Auckland as a transit point.
“A potential joint solution with SIA provides an intriguing option and SIA may look in future at extending its new partnership with Air NZ to include South America. But SIA says at this point the focus is on Southeast Asia, South Asia, Europe and Africa.”
Alternately Air New Zealand could operate the Auckland-Sao Paulo leg, reducing operating costs as Singapore would no longer need to triple stop its crews to cover Brazil.
Feed at the South America end would be critical for any Auckland-South America route to be viable.
Luxon is quoted in the report as saying the airline did not have a solution at the moment. “It’s something we will continue to explore with Singapore Airlines, others and ourselves. It does make sense if you are sitting in southern China and need to go to Latin America to go via Auckland,” he said at the signing of the deal with Singapore Airlines last month.
“We can light up the aircraft and fly to South America, but can we build a business where we don’t lose $30 million a year?”
Air New Zealand would be able to provide some of the fastest connection times to Argentina from Asia. The market is currently served primarily by Emirates and Qatar, but both Gulf carriers only serve Buenos Aires on a one-stop basis, requiring passengers originating in Asia to make two stops to reach Argentina.
Buenos Aires was a previous hub for many International airlines ie Singapore, Qantas etc but price gouging and unfavourable political environment has frightened most of them away until there is a change in attitude.