Air New Zealand, SIA See Network Gains From New Alliance

A proposed strategic alliance linking Air New Zealand and Singapore Airlines will significantly broaden service between the two countries, and will also let Air New Zealand extend its reach into Southeast Asia and other important international markets.

The two airlines intend to form a revenue-sharing joint venture on flights between New Zealand and Singapore. They will also code-share and coordinate sales in a range of markets beyond Singapore, and on New Zealand domestic routes.

Air New Zealand CEO Christopher Luxon tells Aviation Week that the agreement helps fill the most obvious “white space” in the airline’s network—Southeast Asia. He notes that SIA has strong connectivity in this region through mainline service and its SilkAir subsidiary.

The carriers plan to launch the joint venture services as early as December, and Luxon says they hope New Zealand and Singapore regulators will approve the arrangement by mid-year.

Singapore Airlines already operates 12 flights a week to Auckland and daily service to Christchurch. Air New Zealand does not have flights to Singapore, but as part of the proposed deal it will take over five weekly flights from Auckland that SIA currently operates. It will also add two more flights to give both airlines daily service on this route.

SIA will replace Boeing 777s with Airbus A380 service on the Auckland route, on a seasonal basis initially. Combined, the changes will increase capacity on this route by 30%.

From SIA’s perspective, the alliance will allow it to further strengthen its presence in the Australasian market, which is among its most important. Together, the two airlines will have more frequency between Singapore and New Zealand than either carrier could operate individually, an SIA spokesman notes. “Each of us is able to expand our network and there will be [extra] feed into both carriers’ flights,” he says.

While SIA does not reveal market-specific statistics, the revenue-sharing arrangement is not in response to any performance issues on the Auckland route, says the spokesman.

For Air New Zealand, adding Southeast Asian destinations to its network via code-share will let it partner with New Zealand travel and tourism agencies as they launch campaigns in countries like the Philippines and While improved access to Southeast Asia is the most important gain for Air New Zealand from the deal, Luxon says that improving access to Europe, India and South Africa is also a significant benefit from the SIA arrangement.

The code-share services to Europe will not reduce demand for Air New Zealand’s existing flight to London via Los Angeles, says Luxon. Rather, the carrier will now be able to offer connecting flights via Singapore to European markets that are not on its network, such as Italy. This will allow the airline to broaden its offering without using its own aircraft, as it does not want to add more ultra-long-haul one-stop flights.

Although Air New Zealand code-shares with several other airlines, SIA and existing partner Virgin Australia will be its “cornerstone” alliances, says Luxon.

Air New Zealand’s agreement with Hong Kong-based Cathay Pacific—introduced in late 2012—is unaffected by the Singapore deal. It is a comparatively limited arrangement that mainly focuses on Cathay’s China routes. The China market will be “carved out” from the SIA agreement, says Luxon. The Japanese market, where Air New Zealand partners with All Nippon Airways, is another that will be excluded.

Singapore has been served by Air New Zealand previously, but the carrier pulled out in 2006 because it was losing too much money on the route. The deal with SIA ensures that this time the route will be more viable, says Luxon. For example, the two airlines will be jointly marketing the service from both ends.

While SIA and Air New Zealand are major shareholders in Virgin Australia, and both partner with it, these links were not part of the new strategic alliance discussions, says Luxon.