Air New Zealand Adds Nonstop Service to Newark

The last few years have seen a substantial trans-Pacific expansion by Air New Zealand. The carrier has served Honolulu and Los Angeles since 1965, and added service to San Francisco in 2004 and Vancouver in 2007. But since 2015, when the carrier formed a joint venture with fellow Star Alliance member United Airlines, they have added service to Houston, Chicago, and Newark, and bulked up service to San Francisco (all four United hubs). They also separately added nonstop service to Buenos Aires, their first South American destination. In all, the carrier’s trans-Pacific operations in winter 2020 (including the United joint venture) will be as follows:

• • Buenos Aires – 4x weekly 787-9
  • Houston – 6x weekly 777-300ER
  • Los Angeles – 14x weekly 777-300ER
  • Newark – 3x weekly 787-9
  • San Francisco – 7x weekly 787-10 (United), 6x weekly 777-300ER
  • Chicago – 3x weekly 787-9
  • Vancouver – 7x weekly 787-9

In total, Air New Zealand and United will offer 39 weekly departures and 12,768 departing seats per week during the winter peak season from Auckland to the US. Air New Zealand specifically will offer 43 weekly trans-Pacific departures and 13,567 departing seats.

At Newark, Air New Zealand will be able to take advantage of connectivity from their joint venture partner United Airlines, offering connections to the Northeast (and really the entire Eastern seaboard). But there is also substantial origin and destination (O&D) demand for both tourists and business travelers in New York City – it’s the third largest O&D market after LA and San Francisco.

The 787-9 is a game changer for ultra-long haul travel

The news from Air New Zealand came just a day after Qantas operated its first “Project Sunrise” research flight (of a planned three) from New York JFK to Sydney. That flight took 19 hours and 16 minutes to cover a distance of 9,950 miles, and is a precursor for potential nonstop service from Air New Zealand’s (much) larger neighbor. The 787-9 is by no means the first aircraft that can fly these distances nonstop – even 15 years ago the 777-200LR and the A340-500 had that capability.

But the 787-9 is the first airplane that can fly these routes economically – and that makes all the difference. The best way to understand why is to look at airplane operating costs. Traditional widebody aircraft have a “sweet spot” in terms of cost efficiency at between 4000-5500 miles. The reason for this sweet spot is two fold. First, flights in this range can typically be operated in fewer than 12 hours. This is important because it allows you to offer daily roundtrip flights with a single aircraft. In contrast, daily flights on a flight as long as Newark – Auckland require you to dedicate two planes to the route (at 3 weekly flights, one airplane can fly all of the legs). And airplanes are expensive; a typical 787-9 might cost $150 million fully loaded with interiors. If that plane flies with an airline for 12 years, they will need to charge an extra $300-400 round trip (average per passenger) just to break even on the extra aircraft costs.

Additionally, flights past 14 hours tend to run into a second problem, which is that they have to be loaded up with so much jet fuel that they burn extra fuel every hour in flight because the airplane weighs more thanks to the extra fuel.  This is similar to the US national debt, where we take out more loans to pay off the interest charges on our existing loans, which just pushes the debt higher. This second area is where the 787-9 has a big advantage over the 777-200LR (let alone the A340-500). Because it carries fewer passengers, weighs less, and burns a lot less fuel, the 787-9 has 25-30% lower operating costs on a per passenger basis. This doesn’t instantly make every ULH flight viable – you won’t see nonstop service from Jakarta to San Francisco anytime soon for example. But it means that routes that have strong O&D demand and good hubs on either side, routes like Auckland – Chicago/Newark, Brisbane-Chicago, and Singapore-Newark/New York JFK/San Francisco/Los Angeles become viable.

Airlines in the South Pacific turn to ULH as the Kangaroo Route dries up

One of the strategic imperatives drivers behind the launch of nonstop service to more US (and South American) destinations for Air New Zealand and Qantas is the erosion of their traditional profit center on the Kangaroo route between Europe and the South Pacific. Historically, this was a very profitable route for European and ANZ carriers, but the rise of the Middle Eastern hubs (and more recently the Chinese hubs) has collapsed the pricing on this route. Multiple Asian airlines built their hubs on the back of the Kangaroo route (e.g. Thai Airways and Singapore Airlines). And with the added competition from the Chinese airlines and Emirates, Etihad, and Qatar Airways, there just isn’t much room for Qantas and Air New Zealand to profitably fly to these destinations.

This is ultimately what’s behind Qantas’ decision to consolidate its London operations down to a small scissor operation in Dubai and now Air New Zealand’s decision to pull out of London entirely. In the future, you can expect to see both carriers focus on the US, South America, and Asia as the core of their operations and bulk up nonstop flights to these regions.