Talk Money with Tony Field - November 12, 2015

Air New Zealand (Reuters)
Air New Zealand (Reuters)

Air New Zealand wasted no time cutting some of its fares on the day American Airlines confirmed it will be flying into New Zealand.

American Airlines hopes to fly between Auckland and Los Angeles from next June, using a Boeing 787-8 Dreamliner aircraft, in a code-share arrangement with Qantas.

Air New Zealand cut some of its ticket prices to $499 one way.  But that was a special Grabaseat online offer, for flights in May and August.

Other tickets are selling from $785 for flights this month. The fares rise the closer the flight is to the Christmas holidays, with one-way economy fares starting at between $985 and $1135 in mid-December. They are around the $1135 level for flights in mid-January.

The fares drop after the school holidays, with one way tickets priced from $885 for travel in mid-February and from $885 for flights in mid-March.

American Airlines has not announced its fares but says they will be competitive.

Air New Zealand's promotion is smart. The publicity will encourage people to think about a trip to Los Angeles - even if it is six months or a year from now.

It will be interesting to see whether increased competition on the Auckland-to-LA route leads to a drop in passengers between New Zealand and other holiday destinations like Australia, Fiji and Hawaii.

Here is my talk with Paul Henry about the arrival of American Airlines.

Air New Zealand's share price fell 2.6 percent, or 7 cents to $2.65. That followed a fall of almost 5 percent on Tuesday.

Auckland International Airport rose 4 cents to $5.25. That was an increase of almost one percent.

The airport estimates the new American Airlines daily service will boost seat capacity between New Zealand and the United States by 16 percent, adding 165,000 seats per year and contributing $199 million annually to the New Zealand economy.

In the year to September 30, 237,312 Americans visited New Zealand. That was an 11 percent increase on the previous 12 months. There was a 14 percent increase in bookings to the United States, with 178,720 New Zealanders visiting the United States.

American Airlines has an alliance with Qantas, while Air New Zealand has an alliance with United. That means that passengers heading to and from the United States should have an easier time making connecting flights on to other destinations within the United States or in markets like Canada, Mexico, South America and Europe.

Chief executive of the Tourism Industry Association Chris Roberts told Paul Henry that American Airlines has 100 million frequent flyers and it will be promoting New Zealand to those customers as a potential destination.

"Hopefully they'll use their accumulated air miles and reward themselves with trips to New Zealand. So we are going to attract a whole lot of Americans down here who might otherwise not have come."

Air New Zealand is going to be flying to Houston, while United Airlines will from next year fly between Auckland and San Francisco.

"We are perhaps seeing a 30 to 40 percent increase in the capacity, so that is more seats. So the market will respond to that."

"We know Americans want to come here. That eleven percent growth we are seeing at the moment, that is going to continue at least, it could climb even higher."

Chris Roberts says American visitors spend almost $1 billion a year in New Zealand. They do not tend to get as much annual leave as people from Europe. That means they are likely to stay a shorter time than someone from Germany or the UK. But during a one to two week stay they will tend to spend more.

He says visitors from the United States rank third for spending in New Zealand behind Australia and China.

"They are likely to fall in love with New Zealand and come again, be it by cruise or another return flight and tour the country. So they are certainly one of our most valuable tourism markets."

The New Zealand dollar is well down from the highs it reached in July last year when it was trading at 88 US cents.

It was trading this morning at 65.53 cents at 7.30am.

That makes travel to the US more expensive for New Zealanders, but helps make this country a more attractive destination for American visitors.

The kiwi is trading at 92.92 Australian cents.

That's something for potential New Zealand travellers to think about when they weigh up factors like hotel or meal costs in the US compared to somewhere like Australia.

The New Zealand dollar is trading at 43.11 British pence, 61.04 Euro cents and 80.54 Yen.

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