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Air NZ ‘lost over $100 million’ on tough China journey

May 8, 2019 Headline News No Comments Email Email

Air New Zealand has revealed the startling extent of its losses in China, which it says have topped NZD 100 million (AUD 94 million) after 13 years of being in the market.

In a surprisingly frank disclosure at the China Business Summit 2019 in Auckland, the airline’s chief executive, Christopher Luxon, disclosed the full extent of the carrier’s losses in China.

Air New Zealand, 53% owned by the New Zealand government, flies daily from Auckland to Shanghai and sells non-stop flights from Auckland to Beijing through its alliance partner Air China.

Wellington’s Dominion Post newspaper reported Luxon’s vivid revelation at the summit, which was arranged by the Auckland Business Chamber, when he described how hard it was to compete against China’s state-backed airlines.

Air New Zealand operates a “pooling” arrangement (revenue share alliance) with Air China.

It seems to be working in one direction – or at least, Luxon said that in 13 years of operating in China, cumulative losses racked up by the New Zealand carrier would blow through the NZD 100 million mark.

“It has been an incredibly difficult journey,” Luxon said, adding that China viewed its airlines as “a tool of the state”.

The playing field for outside businesses was not a level one, Luxon said – adding pointedly that Air New Zealand could redeploy aircraft on other much more profitable routes.

Instead, it found itself competing with massive state-backed airlines who made losses flying to New Zealand but gained “free and unfettered access to airports here” through doing so.

Luxon pointed out Air New Zealand was an “infinitely smaller business” than the Chinese behemoths; it was not subsidised by the state and it continued “to face major trade and growth impediments and constraints when we show up in China”.

The annual China Business Summit is a top-level forum and New Zealand’s Prime Minister Jacinda Ardern gave the keynote address on Monday. Luxon, who has been chief executive of Air New Zealand since 2013, also chairs the Prime Minister’s Business Advisory Council.

Written by Peter Needham

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