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Wednesday, January 27, 2010

Air New Zealand new longhaul product - some implications

I've already posted some information on Air New Zealand's new longhaul product. This post will cover some of the implications.

Effect on Air NZ

Firstly, I think Air NZ is to be congratulated. They are trying something new to improve the comfort of longhaul non-premium flyers. By differentiating the products they have also acknowledged that not all travellers are alike, and by offering passengers more choice they hope to be more successful. More people attracted to fly Air NZ and more revenue from skycouch and premium economy, means it should be a success. Since they own the intellectual property for the new skycouch (and possibly also the new premium economy seat?) there is also potential for licensing revenue if other airlines decide to take up the same seating.

There are some downsides. The seats cost more and are heavier (thus require more fuel to carry). Instead of managing inventory in 3 separate cabins they have a more complicated job to manage 4 types of seats, with the skycouch being able to be sold as a couch or as normal seats depending on loads. Since it is tricky to predict how well this will sell, and because Air NZ is a fairly conservative airline (despite the apparent contradiction with this revolution), initially the number of skycouch seats is low. This will probably be increased later (as premium economy has been).

There will be a period where Air NZ will have multiple longhaul product offerings which provide vastly different comfort levels.

  • Business class - improved business premier on 777-300ER, original business premier on 777-200ER (until refit) and 747-400, old business class (non-lie flat) on 767. This is not much different from the current status.
  • Premium economy class - new space seats on 777-300ER with high degree of comfort, economy seat with slightly more width and significantly more legroom on 747-400 and the less comfortable version on 777-200ER (until refit), no premium economy on 767 however space+ economy seats are available to elite status frequent flyers and passengers on full fare and provide more legroom than economy. A wide range of product & comfort levels.
  • Skycouch - available only on 777-300ER and refitted 777-200ER.
  • Economy class - 34" pitch & 18" width on 747-400, 32" pitch & 18" width on 777-200ER (until refit), 33" pitch & 17" width on 777-300ER, 35" pitch & 17.5" width in space+ on 767 and 32" pitch & 17.5" pitch for the rest of economy on 767. While 1" doesn't sound like much, every little bit counts for passengers who are tall &/or big, particularly on long flights.

Air NZ will need to work out how to handle customer expectations. Some of this is common sense - not promoting the new product on a route until every flight has the new longhaul product. They also need to consider how to deal with aircraft substitutions. Just as today a flyer who has booked premium economy and chosen a flight operated by 747-400 will be disappointed to end up flying on a 777-200ER, someone who picks 777-300ER for the new premium economy or skycouch seating and gets an inferior option will also be disappointed. A cautious approach is likely, and this means savvy travellers can take advantage (more on this below).

Effect on flyers

Buried in the detail of all the positive news are some negative effects. Economy class will be 3-4-3 across which means a narrower seat. The legroom will also be slightly less than on the 747-400 aircraft which will soon be retired, although I don't see that as problematic given the 777-200ER already has less legroom.

The configuration has more middle seats. Since 22 middle seats are reserved for skycouch customers, the chances of an empty adjacent middle seat elsewhere in the cabin is reduced. The chances of being seated in a middle seat are increased with 44 window and aisle seats taken up with the skycouch. Available window seats in particular, and to a lesser extent aisle seats, are further back in the cabin which may be important to some frequent flyers used to getting seats in the first rows of economy.

Getting a row of economy seats to yourself (the budget skycouch) will be very unlikely on most routes since Air New Zealand's load factors are typically high. This is good for the airline, since those wanting more space are encouraged to pay for it upfront (by skycouch supplement or by upgrading to premium economy) instead of taking a gamble.

For those flying alone, the skycouch is not a good option. For a similar price (ie around 2.5 times fare) they can buy premium economy and get better comfort in seat mode, better food and drink, and more frequent flyer miles. The only advantages skycouch has over premium economy for a single flyer is the couch is flat whereas premium economy only has 9" of recline, and skycouch gives more personal space.

In premium economy, the outer space seats are intended for single flyers with the inner space seats best placed for couples. I doubt there will be any restrictions on selecting your seat based on how many passengers there are in a booking.

The number of premium economy seats are higher than the current configurations. Whether the greater number of seats being sold at much higher fares than economy is enough to offset the greater space per premium economy seat is not yet known. However, despite Air NZ's claims the premium economy fares will not rise with the introduction of the new seat I expect the fares will be higher within a few months, at least once enough aircraft are available to guarantee the new product on a given route. I hope I'm wrong on this, but when premium economy was first introduced Air NZ made strong claims about relative pricing (only 20% above economy fares) which were quickly ignored as fares climbed.

The ratio of the number of premium economy to economy seats is much higher with 777-300ER than the other aircraft. 1 premium economy per 4.5 economy seats (assuming all skycouches are sold) on 777-300ER vs 1 per 6.7 on 777-200ER and 1 per 7.5 on 747-400.

The ratio of the number of business to premium economy seats for 777-3o0ER is in between the other configurations. 1 business per 0.9 premium economy on 777-300ER vs 1 per 0.7 on 777-200ER and 1 per 1.2 on 747-400.

These ratios are of interest to frequent flyers, particularly for those wanting an upgrade. The upshot is there is a higher proportion of premium seats.

1 comment:

libertyscott said...

One of the expectation concerns for Gold Elites flying in Y has to be the difference between being entitled to Space + on 767s and A320s, and what one would get on the 77W. With 35" pitch on 767s, with a 2-3-2 configuration, arguably these will be far more desirable than flying on a 77W with 33" pitch and 3-4-3 configuration. A Gold Elite FF would get seats at the front of the 77W, but find there is less legroom flying AKL-LAX than there is flying AKL-SYD.

That is a negative. The idea presumably is the Gold Elite passenger would choose Y+, but given Space + is free to Gold Elites, this isn't quite the same thing.

NZ could have introduced Space + in Y on 77Ws, with 3-3-3 seating and 35" pitch, but gone for 3-4-3 and 32" in the back, but that risks adding a fifth product configuration, as well as meaning people could chance getting Space + on long haul - as there are far less NZ status FFs on long haul in Y than on Tasman or Pacific routes.