Air New Zealand this week announced a new strategy built around a simplified pricing structure for Trans-Tasman fares, complete with a simplified on-board product offering.
Translation: Business Class is out, modified (or perhaps "glorified" is a better word) economy seating is in.
The new 4-tiered product and pricing approach is apparently as follows: the lowest price gives you a seat, a coffee or tea and access to entertainment; next highest price gives you the previous plus checked bags; 3rd highest adds a meal and drinks and the most expensive option features lounge access and a confirmed empty seat next to you. How luxurious.
According to Air New Zealand, they are on average only selling 1 Biz Class seat on any given Trans Tasman flight, so the thinking is that perhaps a 3-ish hour flight is not long enough to justify the higher cost of a Business Class product. So they're going to change their cabins to swap out Biz Class seats for Economy seating, but with the above mentioned flexible configurations and on-board amenities to choose from in order to determine the price for the seat. And, they hope, convince those seeking a more up-market product can be achieved with a standard Economy seat - with "perks."
From a creativity standpoint, I think this is admirable and followng on their announcement a few weeks ago of their Skycouch "lie-flat" long-haul Economy product it reinforces to me that the Kiwi carrier continues to push the creative envelope that Qantas seems to not even want to open. That being said - will this idea really fly?
First challenge: making sure corporate travel managers can figure out what level(s) of this new fare structure and related onboard product fits into their travel policy. Obviously if a company's current Trans Tasman policy is business, which of the 4-tiered product is an appropriate replacement? The 3rd-highest priced option with free drinks and a meal, or the most expensive option which provides those features plus lounge access and a blocked adjacent seat? Believe it or not, some companies still have an "International Flight = Business Class" policy which now will have to be re-thought should that company fly Air New Zealand. Or perhaps this may backfire and Air New Zealand customers my decide just to switch rather than deal with re-working their policy. Interesting...any corporate travel managers out there in the Cafe' care to comment?
Next Challenge: Convincing road warriors that this is a "premium" product. Yes, AKL-SYD isn't exactly the Kangaroo Route, but there are indeed plenty of business travellers who think that having to carry their passport (at least for now - soon NZ and Australia will eliminate that hassle of immigration...yeah!) means they're entitled to a Business Class seat. To most of them, the size of the seat is more important than whether the one next to you is empty, and especially if there's no incremental legroom in the new product then I'd predict this approach will fall flat with Business Travellers used to bigger seats.
Last Challenge: avoiding nose removal for facial spite. This move by Air New Zealand, although at the moment seems prudent due to GFC hangovers and a continued challenging operating environment, adds to the trend of carriers pulling out of premium products citing what they see as an irreversible trend in premium traffic. Qantas and BA both recently have stated they are changing aircraft product offerings as they don't see a near-term recovery in corporate premium purchasing. However, this could be short-sighted, as several corporate travel managers and a TMC leaders have commented to me lately that since the start of 2010, carriers that feature premium products prominently (try saying that 5 times quickly) like Singapore, Emirates, Etihad and Virgin Atlantic are enjoying quite full Biz Class cabins and in fact getting seats on top routes require booking a month in advance. Perhaps this is perception rather than reality as the airlines' recent financial reports do seem to be quite glum. But let's not write off premium traffic just yet, as my recent travels have seen full cabins, business people anxious to get out on the road, and a First Class lounge at LAX which had to ask people to remove their bags from seats in order to fit all the people in. No lack of premium demand there...
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