Air New Zealand will start charging a lot more for its premium economy cabin on flights taking off from 25 October 2015 between Auckland and east coast trans-Tasman and Island destinations.
The price hike comes as Air New Zealand introduces a formal premium economy offering on these short-haul routes.
At present, a place in the premium economy cabin (where the cabin exists) on these shorter flights is available in limited numbers for a nominal fee of AU$20 as paid seat-select (or free of charge to status-holding frequent flyers of the airline and its partners).
The airline’s chief sales and commercial officer Cam Wallace is quoted in the press saying that “we now have a consistent premium economy offering across our twin aisle widebody fleet”. We struggle with this statement.
For a start, Air New Zealand’s wide-body fleet still includes five Boeing 767-300 aircraft and there is no prospect of those aircraft leaving the fleet any time soon. Those Boeing 767 aircraft are fitted with a dated cabin configuration offering only business and economy. Regular readers will already know that we were shocked by Air New Zealand’s Boeing 767 business class.
Furthermore, Air New Zealand currently have two different premium economy seating products across its fleet (pictures supplied by Air New Zealand):
UPDATE: A third configuration has just been phased out in late 2015 (and yes – we’ve checked – the below picture is indeed of that premium economy cabin):
On consistency, it is important to note that the vast majority of the airline’s services on trans-Tasman routes are operated by Airbus A320 or Boeing 767 aircraft, neither of which offer premium economy cabins.
A quick scan of the current timetables confirms that Air New Zealand only have a single flight Auckland / Melbourne and Auckland / Brisbane each day operated by aircraft with a premium economy cabin. The Auckland / Sydney route sees two daily wide-body services, which at present are mostly operated by Boeing 767 aircraft.
It is worth noting that Air New Zealand flights eastbound from Australia on Boeing 777 and 787 aircraft tend to leave at business-traveler unfriendly times in the middle of the day. This is because the aircraft are needed back in Auckland in time to operate an evening longhaul departure.
Air New Zealand scales back ‘Works Deluxe’
When Air New Zealand physically removed business class seating from its narrowbody Airbus A320 aircraft nearly five years ago as part of introducing its Seats to Suit offering, the airline introduced what it calls Works Deluxe in an attempt to retain high spending customers used to a business class cabin.
Works Deluxe is basically a regular economy seat with a seat next to it that is empty, something that top-tier elite status members had been used to getting for free from Air New Zealand on lightly-loaded international flights. To this day, a number of airlines (including key competitor Qantas) continue this informal benefit for their top-tier passengers and have been successful in snagging high revenue business from Air New Zealand as a result.
To make market room for a shorthaul Premium Economy, Air New Zealand is discontinuing its Works Deluxe product on Boeing 777 and 787 aircraft. Works Deluxe will be only available on Boeing 767-300 and Airbus A320 aircraft. The airline has also removed lounge access from Works Deluxe customers across the board for tickets purchased from 17 June 2015.
In a customer-friendly move, passengers who are already booked and allocated seats in the premium economy cabin for flights after 25 October will be rebooked into premium economy as an upgrade free of charge. Status members of its loyalty scheme, Airpoints, will also still be to redeem their complimentary upgrade (of which they get a maximum of 3 per year) to go from Economy to Business, bypassing Premium Economy on shorthaul routes only.
Premium Economy fares are uncompetitive in the present market
At the time of writing, the first of these services from Australia is priced at AU$520 (including taxes) for a one way flight from Brisbane to Auckland. In contrast, its trans-Tasman alliance partner and minority shareholder Virgin Australia is offering business class on the same route for AU$650 (including taxes) and Taiwanese airline China Airlines have a business class fare for AU$416 (including taxes).
Furthermore, on that route Air New Zealand offers a selection of three services that day in business class at a special fare of AU$800 (including taxes) or a choice of six services in economy at fares from AU$207 (including taxes). Business travelers tend to value a choice in flight schedule.
Given that pricing for Air New Zealand’s premium economy class on shorthaul services is in the realm of business class sale fares, we expect that pricing will be adjusted downwards as the launch date approaches (perhaps through inclusion in fare promotions).