More Jobs, Tourists And Direct Destinations

December 9, 2002

More Jobs, Tourists And Direct Destinations Flow From Airline Alliance

Statement made by Ralph Norris, Managing Director, Air New Zealand Limited

The strategic alliance between Air New Zealand and Qantas will create 200 new jobs in Air New Zealand and a minimum of 2,500 additional jobs in the tourist industry. The new jobs within Air New Zealand will be in our Engineering Services operations in Christchurch and Auckland.

Currently, many of the engineers at our Engineering Services operation are employed as short-term contractors, and their work is underpinned by Air New Zealand successfully tendering for ad-hoc, third party contracts. Their ongoing employment is dependent on Air New Zealand continuing to win sufficient tender work from other international airlines and defence forces.

In the 2001/02 financial year we won 43% of the work Qantas put out to international tender at a value of $20 million, and this supported the employment of some 100 of those engineers.

Provided that we continue to meet the high technical standards and efficiency requirements of Qantas, we expect that Qantas’ growth and the alliance will result in an increase in out-sourced heavy maintenance work from Qantas creating an estimated 124 new jobs.

In addition we will be able to invest some $100 million in new engineering infrastructure. This will create the opportunity to continue tendering for even more maintenance work from other international airlines, requiring more staff and increasing the overall engineering workforce by 200 over the number we currently employ.

The alliance will also create a minimum of an additional 2500 jobs in tourism according to the economic analysis prepared by NECG.

As a direct consequence of the alliance, the NECG report estimates that approximately 53,000 additional tourists will visit New Zealand each year. Qantas will also be actively marketing Air New Zealand and New Zealand as a tourist destination in those markets in which it has a strong presence.

Based on the accepted tourism industry ratio of one new job in tourism for every 14 tourists, that would amount to 3786 new jobs, so the NECG estimate of 2,500 additional jobs in tourism is extremely conservative.

In total, the NECG report estimates the alliance will boost New Zealand’s economy over the next five years by $1.4 billion.

This calculation identifies potential new routes opening, for example Auckland / Adelaide, Auckland / Canberra, Auckland / Hobart and Wellington / Canberra. The formation of the alliance will not see the end of affordable air fares in New Zealand or across the Tasman.

The NECG report undertook price modelling, comparing future fares.

The report says that with the alliance, in three years time, on average air fares compared to today’s fares will likely rise by 3.1% on domestic services and 1.7% on the Tasman. Occurrences outside the control of the airline could impact on these percentages.

Air New Zealand is committed to the retention of the low fares business model embodied in Express Class, and to extending the Express Class concept to the Tasman as well as the retention of its own well established no frills airline, Freedom Air.

As part of the application to the regulators, the airlines have proposed to enter into enforceable commitments designed to facilitate new competition. These include:

- Facilitating new entrants including, if necessary, access to terminals, ground services and engineering facilities for new entrants

- Not taking unreasonable actions in relation to capacity and prices on routes where it is the sole operator and

- Ensuring the specific delivery of public benefits negotiated with regulators.

Ends

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