Airline travel from New Zealand to the United States has seen plenty of deals over the past year with the introduction of flight by both American Airlines and United Airlines on the Auckland (AKL) to Los Angeles (LAX) and Auckland (AKL) to San Francisco (SFO) routes during the middle of 2016. These routes had been operated exclusively by Air New Zealand for a number of years since Qantas stopped flights to North America out of New Zealand in 2012.
The tie up between Air New Zealand and United on the SFO route was a joint venture that also revenue shared. It meant a reduction in Air New Zealand services (who previously operated twice daily flights some days) that were in turn replaced by the United flight. The earlier United Airlines flight time meant better connections into SFO for those heading across the country on the United Airlines US domestic network.
United have today pulled year round services on the AKL to SFO route and made this route seasonal. The last scheduled services will be on April 16th 2017, however availably beyond March 24th 2017 seems to be non existent. The route will recommence on 31st October 2017.
Those who are cynical will know that the reason for such a tie-up between both airlines seemed merely to introduce additional capacity into North America to compete with American Airlines (AA) who launched AKL to LAX and partnered with fellow oneworld partner Qantas on this route. Both Qantas and American had applied for permission to operate Australian and New Zealand routes as a joint venture, however their application was declined by the US Department of Transportation (DOT) in November, a decision that has also potentially throw into doubt the future of their New Zealand operations in light of their low passenger loadings on this route.
The introduction of American Airlines services saw prices drop as low as $899 return from Auckland to Los Angeles as competition heated up on the route. Such pricing is not sustainable however, and even with pricing that low American Airlines have struggled to fill seats on their planes. Rumours have been around for some time that they’ve been considering pulling the plug on this route, so it’ll be interesting to see if anything eventuates in light of this news from United Airlines.
In my inbox this morning I received an announcement of Air New Zealand’s new Flexitime Membership. It’s been a while since Air New Zealand made any significant changes to their domestic flight offerings, and if you’re a frequent flyer this membership represents a true bargain that could easily pay for itself in a single trip.
On Domestic flights Air New Zealand offer four fare types -
Flexitime Membership is an annual fee of $199, is only available to specially invited customers, and at this stage is only available for sale during a trial period until the 15th November (what happens after then is unclear). For your $199 you get the ability to purchase seat only fares but get the benefits of flexitime for all flights – this means you can change your flight on the day of departure, get a free bag, and also have the ability to select a seat. Airpoints Dollars and Status Point earn is that of the seat only fare.
The ability to change a flight only applies to the person with membership, so you can’t book a flight with somebody else and make changes to both passengers.
For those who don’t travel frequently, the significant benefits of a flexitime fare may not seem obvious. While primarily targeted at business customers who may find their plans change and giving them the flexibility to change their flight time to an earlier or later one, flexitime fares are increasingly being purchased by passengers to save money on airfares.
Looking at the example below it’s $139 for the cheapest flexitime fare between Auckland and Wellington this Friday. Later on the day it’s up to $314 for a seat only fare on flights later in the day. If you were travelling between Auckland and Wellington this Friday evening and were only planning on a seat only fare, by buying a $139 fare on the 6:30am flight you can change this on the day you are flying (from midnight Thursday) to the 8:00pm flight for free, meaning you’ve saved yourself $140 – or 50% of the fare price. With Flexitime membership you would save even more as you’d only need to spend $109 for a seat only fare on the 6:30 flight.
Playing a game like this not for the faint hearted – you’re gambling that there is space on the flight you want to move to, and if the flight you want fills up, you’re going to be stuck. On main trunk jet routes this is unlikely except for very busy travelling times, but on regional routes with only a few flights per day it’s not recommended as it’s a lot easier to get caught out.
Flexitime Membership changes the game entirely. The $199 membership could easily pay for itself in a couple of flights, but it’s likely to significantly increase the number of passengers flying with flexitime fares, meaning same day changes could become more difficult. This is no doubt the reason why sales of the product are currently only available until Mid November and that it is considered to be a “trial” product.
More details are available on the Air New Zealand website - https://www.airnewzealand.co.nz/flexitime-flyer-membership
Have an interest in retail payments and credit card interchange rates? Here’s your chance to have a say.
In May this year I wrote a blog post about credit cards and reward schemes - “Addicted to the Airpoints Credit Card money go round? You might be about to be pushed off.”. I wrote this after the Ministry of Business, Innovation and Employment (MBIE) was asked by the Government to examine retail payments in New Zealand. This followed similar investigations in both the United Kingdom and Australia over the past two years that have seen major changes to retail payment schemes. Amongst other things these changes have seen credit card interchange rates slashed, meaning that the cost for retailers to accept credit cards has been cut significantly. It has also meant major changes to credit card rewards programs in the United Kingdom, but the effects on the Australian market have yet to be felt.
MBIE are now calling for public submissions on the issue, so if you’re a retailer who believes that your cost of accepting credit cards is too high, or simply an individual who has an opinion on the matter here’s your chance to be heard. Submissions close on the 13th December 2016.
Even if you have no interest in making a submission but have an interest in understanding how payments systems work the issues paper makes great reading.
On Monday this week New Zealand saw the launch of a new nationwide Internet provider back by Fairfax and known as Stuff Fibre. Much fanfare (mainly on Fairfax owned stuff.co.nz) has preceded the launch over the last few months. Stuff Fibre joins the list of around 100 existing ISP’s in the incredibly competitive retail market.
Anybody visiting Stuff today will see some new advertising. Apparently a mere two days after launch Stuff Fibre is the #1 ranked National Fibre Provider according to broadbandcompare.co.nz
#1 for what? That’s a very good question. Visiting the broadbandcompare site offers no suggestions as to what Stuff Fibre have been ranked #1 for. There are no website comments, and as broadbandcompare doesn’t actually rank ISP’s or plans it doesn’t appear it’s #1 for anything. Considering their offerings only hit the market on Monday I’d be surprised if Stuff fibre had any more than a few hundred active connections across New Zealand.
Broadbandcompare is a newly launched comparison site that attempt to compare broadband plans across a large number of ISP’s. It’s revenue appears to be advertising based, with ISP’s being able to buy packages promoting their products and brand on the site. There is absolutely nothing wrong with this. This model however does bring the concept of integrity into play. Since there is absolutely no feedback or reader comments any views or rankings on the site appear to be either the views of the site providers and/or influenced by advertising paid to them by ISP’s.
Stuff promoting their own business through the use of “promoted content” with a meaningless claim that could quite simply be summed up as bullshit really takes journalism to a whole new low.
UPDATE - broadbandcompare have now said any claims made by Stuff are incorrect, and that they have contacted Stuff about removal of these ads.
It’s not uncommon for companies to attempt to stretch the truth when it comes to advertising. Skinny have taken this to a whole new level with a bus stop advertising billboard saying that Vodafone’s 2G network is shutting down – with the minor problem being Vodafone’s 2G GSM network is not being shut down until 2025. I stand to be corrected, but right now I’m pretty sure it’s only 2016. Warning people of something that’s happening in 9 years seems a little bit over the top to me.
In March this year Vodafone New Zealand publically announced the 2025 shutdown of it’s 2G GSM network. Along with phone calls and text messages this network carries traffic for over 1 million machine to machine (M2M) devices such as smart electricity meters that use the GPRS data network. Upgrading large numbers of devices to newer hardware that supports newer 3G and 4G networks takes time, hence the long timeframe.
Vodafone announced at the same time that at some point in the future (prior to 2025) that voice and SMS services on the 2G GSM network would be disabled, however they would still be maintaining the GPRS data functionality on the 2G GSM network for M2M devices. When this occurs any users of 2G/GSM only phones would find their phone would stop functioning.
The vast majority of Vodafone customers have 3G or 4G capable handsets, and it would be pretty rare to have purchased a new handset within the last 3 or 4 years that only supported GSM technology. Vodafone have not sold any GSM only phones for some time now, and even cheap $20 prepay phones support 3G technology.
Vodafone have not officially announced any date for this to occur, but speculation I’ve heard is that this *may* occur in 2018 or 2019. It is certainly not happening this month, or even this year.
Skinny are clearly misleading the public with this campaign and need to be called out for spreading what can only be deemed as misleading FUD. One can only wonder why somebody thought this campaign was a smart idea..
Why are airport taxes and service charges so high on Trans Tasman flights between New Zealand and Australia?
Air New Zealand has a sale on flights to Australia today. There is nothing amazing about that – these days it’s something that happens almost as a regularly as a sale at Briscoes.
I happened to notice a few comments on social media this morning from people complaining about the cost of return flights from Australia. Air NZ advertise flights to Australia for $149, but make no mention of the price of the return flight – and that’s not surprising, because it’s a lot more than $149.
Here’s an example of a return flight to Sydney from Wellington with flights for $149 to Sydney, and $209 back.
The first obvious conclusion for those that don’t understand the aviation industry is that Air New Zealand are blatantly ripping off customers – but the reality is far from that.
When you look at the breakdown of that $149 flight, $62.40 of it is actually tax and service charges. This is a combination of New Zealand departure tax, and the Australian arrivals charge.
For the return $209 flight, $122.56 is tax and service charges. This is a combination of Australian departure tax, and the New Zealand arrivals charge.
So from a $358 airfare, $184.96 is simply tax and service charges that’s collected by Air New Zealand and paid to both Australian and New Zealand Governments. That’s over 50% of the total cost on a entry level special fare. When you see airlines offering airfares under $100, that’s not enough revenue for the airline to actually pay for the fuel that you’ll burn.
As a comparison it’s only $156.96 in tax and service charges if you head off on a cheap Air New Zealand special to Los Angeles to visit Disneyland and stop by for a world famous 4x4 burger and animal fries at In-n-Out burger.
There has been plenty of talk from both Governments in recent years about improving the Trans Tasman experience for passengers, and talk of pre-clearing Customs and Immigration before hoping on the plane. While it would be nice to see this, one can only live in hope that one day we might see these charges actually drop rather than continue to rise.
Flight reviews – Air New Zealand NZ87 Auckland (AKL) to Hong Kong (HKG) in Premium Economy and Air New Zealand NZ 80 Hong Kong (HKG) to Auckland (AKL) in Business Premier on the 777-200ER
It’s been quite a few months since I’ve flown internationally so a quick trip to China was a good opportunity to compare two different premium classes of service flying Air New Zealand to Hong Kong.
Air New Zealand flights to Singapore, Hong Kong and Shanghai all leave Auckland late at night for an early morning arrival. NZ87 has a scheduled departure time of 11:55pm and scheduled arrival into Hong Kong of 7:30am. The return NZ80 flight from Hong Kong has a scheduled departure time of 7:10pm and scheduled arrival into Auckland of 10am.
Air New Zealand operate their 777-200ER aircraft on this route. Their fleet of these aircraft were all fully refitted during 2014 and 2015 giving them new seats in all cabins and a new Panasonic eX3 in-flight entertainment (IFE) system. The aircraft features 26 fully lie flat seats in a 1-2-1 layout in Business Premier, 40 seats in a 2-4-2 layout in Premium Economy, and 246 seats in a 3-4-3 layout in Economy. Economy class also features the innovative Skycouch.
I’m a huge fan of the Air New Zealand Premium Economy Spaceseat offered on the 777-300ER fleet. In my view (and of those who have given Air NZ awards for it) this seat and offering is the best Premium Economy offering in the world. As part of Air New Zealand’s current “profit at all costs” cost cutting mentality the future of this seat is uncertain, with expectations that I’ll be removed from the 777-300ER fleet in 2017 during a refit. The 777-200ER is fitted with a more conventional Zodiac medium haul business class recliner seat as the Premium Economy offering. This seat is also fitted in Premium Economy in the 787-9 Dreamliner, and will also be used to replace the Spaceseat on the 777-300ER assuming that it is to be replaced. The fully lie flat Business Premier seat is the same as that used on the 777-300ER and 787-9 Dreamliner.
The onboard IFE system uses current generation Panasonic eX3 and features a multi touch HD touch screen. Reliability of Air New Zealand’s IFE systems is an issue with issues on the vast majority of flights I’ve been on over the past year including an entire flight with no IFE across a number of seats returning from Vancouver last year. Performance of the eX3 system is superior to the eX2 system fitted to the 777-300ER fleet. The screens feature a single 3.5mm headphone connector and USB port, along with a dual 3.5mm headphone connector on the seat. If you are using the single 3.5mm connector in the IFE screen you will be required to unplug headphones for takeoff and landing for safety reasons.
The screen also features a USB port for playing content or charging devices. Like the majority of USB charging ports in public places it is a “dumb” charger and will not be able to charge most modern devices at anywhere near full speed. The USB would only charge my Sony Xperia Z5 at 330mA, meaning it would take roughly 9 hours to fully charge my phone. Compare this to my Anker portable battery pack that is a fully featured smart charger and will charge my phone at 1500 mA, fully charging it in well under 2 hours which is nearly 5x faster.
As I had never actually flown in the new Premium Economy seat I opted to try it on the way to Hong Kong, and fly Business Premier back from Hong Kong. I was seated in 24B on the way over, and 4K on the way back.
One minor disadvantage of the 777-200 cabin layout is that bathrooms are shared between Premium Economy and Business Premier. Curtains partition off the Economy cabin but no such segregation exists between Premium Economy and Business Premier meaning passengers often mingle around the galley and bathrooms. Access to the front bathroom is restricted to Business Premier passengers, however at certain times of the flight only 3 bathrooms shared between 66 passengers means queues for the bathroom are a reality. If you’re peckish during the flight snacks and drinks are on offer in self service baskets in this area for customers of both cabins.
Auckland to Hong Kong NZ87
As I flew on a connecting flight from Wellington I took the last flight of the day at 8:45pm giving me a couple of hours in Auckland before the flight. After a quick 10 minute walk between the domestic and international terminals in Auckland I enjoyed a few quiet drinks in the new(ish) International Koru lounge that opened in 2015. Auckland airport is relatively quiet at this time of night so there were no delays clearing immigration or security.
With boarding scheduled for 11:10 I started heading down to the gate around this time and was met with a completely full gate lounge and lots of people standing around. It wasn’t until around 11:40 that any form of PA announcement occurred telling is what we all gathered – the flight was going to be late. Better communication would have been nice. Boarding started a few minutes later and we pushed back from the gate around 30 mins late. Air New Zealand typically only use a single air bridge for boarding at Auckland so boarding is in stages with Business, followed by Premium Economy, and then Economy.
My first impressions of the Premium Economy seat were good. Taking a photo is a little hard on a dark aircraft due to Air NZ’s pinkish LED lighting, so I’ll just use a stock photo.
The Premium Economy offering includes an amenity kit containing an eye mask, socks, toothbrush, pen and NZ brand Antipodes moisturiser and lip balm. Also present are noise cancelling headphones (which are a significant improvement over the regular headphones but very average compared to my Bose QC15’s), a 3/4 sized pillow, blanket and water bottle. Legroom is great, with relatively easy access past any seat neighbours without them having to get up.
I was seated in 24B which has the downside of being a row behind the bassinette seats in 23AB and 23JK. Noise from twins in the in front was an issue, so if screaming babies aren’t your thing sitting further back may be a better option. Noise from the galley wasn’t an issue.
After takeoff hot towels and drinks were on offer with a choice of juice or sparkling wine. Air New Zealand no longer serve champagne in Premium Economy but based on my past experiences if you ask specifically for this during meal service you may get lucky. One minor peculiarity is that this initial drink service is in plastic cups, while all other drinks are served in the same funky self-righting glasses used in the Business Premier cabin. I can only assume this is to save another 40 or so dirty glasses, but in my view it is a slight cheapening of the product offering.
Not long after this meal service began, with meal trays being delivered to the seat containing the starter and desert, followed not long afterwards with the bakery offerings of various breads.
The crew seemed extremely flustered and rushed during service and it was around 30 minutes before the main course was delivered. Looking around the cabin most people had got sick of waiting and had started eating their panna cotta desert – and the fact many only had a spoonful or two removed when trays were collected shows black sesame wasn’t a popular flavour. I’ve had some fantastic panna cotta deserts on Air NZ, but this flavour was not one of them.
The starter and main course were both delicious. Menus between Premium Economy and Business Premier are very similar, with many of the same options but simply fewer options overall. In Business Premier the meals are fully plated up (as you’ll see below) rather than simply reheated in the meal tray. Air New Zealand’s Premium Economy is much more ‘Premium’ than ‘Economy’ and very different to other airlines such as Lufthansa who offer near identical catering and beverage offerings in their Premium Economy and Economy and simply differentiate with a slightly better seat with more space.
The crew still seemed quite rushed while clearing up and it was quite some time before the curtains were shut and cabin lighting dimmed. Service in Business Premier had been a lot quicker and the cabin was darkened significantly earlier.
As it was now around 3am New Zealand time I headed off to sleep, and got a solid 4 1/2 hours sleep only disturbed by the babies in front crying. Bose really need to make baby cancelling headphones! :) I found the seat comfortable to sleep in however the leg rest didn’t quite adjust to where I wanted it.
After watching a couple of TV shows it was time for breakfast. Breakfast’s on Air New Zealand are a big meal which is great if you’re hungry. First up was fresh fruit and cereal with an option of muesli/granola or bran flakes. This is served with yoghurt and milk. This is followed by a choice of toast and croissants, followed by the hot meal option.
After the trays were collected it wasn’t long before the crew began preparing the cabin for landing. Overall the flight was an enjoyable one, apart from the crew seemingly being very rushed during the initial meal service. As an Air NZ Elite customer there was no Elite recognition by the Inflight Service Manager (or any other crew) of myself or the other Elite passengers in the Premium Economy cabin.
As a Spaceseat fan I was keen to try the new Premium Economy seats to compare the two. Overall the seat offered a similar level of comfort and I found sleeping in the seat fine. It does lack the privacy the Spaceseat offers, and IFE screens are some distance away due to them not popping out on an arm like the Spaceseat. The Spaceseat is a very polarising product with some very tall or short people finding these uncomfortable, but I still rate the Spaceseat as a superior offering and it will be very sad to see these disappear purely on the basis of financial gain rather than customer satisfaction. Air New Zealand may be able to fit more of these seats on the same cabin area on the 777-300ER, but I think you can guarantee prices won’t drop as a result!
Hong Kong to Auckland NZ80
I had around 90 minutes free on my way back through Hong Kong from Beijing so had time for a quick snack and shower in a lounge. If you’re flying Air New Zealand in Business Class or are Star Alliance Gold you have a number of different lounge options available. *G access is available to the United Club, Thai Airways Royal Orchid or the Singapore Airlines SilverKris lounge. The SilverKris lounge is around 20 minutes walk away from the gates Air New Zealand use, whereas the others are very close. If you’re an Air NZ Elite customer you can also access the brand new Cathay Pacific Pier Business Lounge – this is accessible as part of the NZ/CX partnership on the Hong Kong/Auckland route.
I visited all three *G lounges earlier in the week and will write a quick review when I get time. My recommendation would be Thai Royal Orchid, followed by the United Club, and lastly the SilverKris lounge. Both the Thai and United Club are above the gates offering great views of the airport and apron. The SilverKris lounge is great, but windowless.
If you are Air NZ Elite visiting the new Cathay Pacific Pier Business Lounge is a no brainer. This lounge is quite simply stunning and is vastly superior to any of the *G lounges on offer.
It was only a few minutes walk to the gate and I got there just as boarding commenced. Dual air bridges were in place so boarding for all passengers was occurring at the same time. Business was boarding via door 1L, and Premium Economy and Economy via 2L.
I’ve flown Business Premier plenty of times with Air New Zealand and really love their seat so chose a window seat. The seat is licensed from Virgin Atlantic and the original dates from the early 2000’s so is starting to look a little dated compared to many new seats currently being deployed such as the new B/E Super Diamond. It doesn’t offer the same level of privacy as many new seats now being deployed, and there is no way for couples flying together to easily chat. I recommend any couples sit opposite one another in the aisle, rather than the middle seats or behind each other.
I have a preference for B/K seats rather than A/J as I prefer to sleep on my right hand side. This means my face has the open space of the IFE screen side of the seat rather than the back wall of the seat.
After sitting down I was greeted and offered a refresher towel and pre flight drink of orange juice or sparkling wine. Air New Zealand do not serve champagne while on the ground – they only open this when airborne. Orders were taken for a drink after takeoff, and as I was celebrating my birthday champagne was the only logical choice! Air New Zealand serve Charles Heidsieck Brut Reserve.
The amenity kit contains the same products as Premium Economy, but is in a tablet sized felt bag. Noise cancelling headphones and a bottle of water are also present.
Not long after this the Inflight Service Manager walked around the cabin introducing herself to passengers and handing out arrival documentation for New Zealand.
Orders were taken for dinner, and not long after the meal service soon commenced. Elite customers were given first option from the menu. I opted for the Salmon and a few items from the bakery selection. This was followed by the stir fried chicken, and cheesecake for desert. All were incredibly delicious.
Converting the seat to a lie flat bed involves flipping the seat over. There is no point trying this yourself as the crew are experts. The bed is complete with a memory foam mattress, two pillows, and a duvet. After a Glenmorangie 10yr as a nightcap I headed off to sleep for a good 5 hours sleep.
The cabin can tend to get a little noisy once people start waking up and the crew start packing up the bedding so if you are a light sleeper you’ll probably find it difficult to sleep through this if you’re not wearing earplugs and eye mask.
First up was a berry smoothie, followed by fresh fruit, yoghurt and cereal. Up next was a selection of bakery items, and finally the hot meal option. I absolutely love the bacon and egg Ciabatta with BBQ sauce, and as it was my birthday I saw no reason to settle for anything else!
Once the cabin had been cleared we were well on our way into Auckland, helped along with a very strong tail wind across the Tasman Sea. Overall the flight was a great one with a friendly crew and great service.
When Air New Zealand launched the 777-300ER into it’s fleet in 2011 one of the most talked about features was the introduction of the new Premium Economy Spaceseat. This seat, developed in-house by Air New Zealand and design company Ideo, had originally been designed for the Boeing 787 Dreamliner. Due to the delays in the Dreamliner project (the first aircraft was due to delivery in 2010 but ended up entering service in 2014) Air New Zealand ended up deploying these seats in the 777-300ER first.
The Spaceseat was a revolutionary product for Premium Economy for both Air New Zealand, and the airline industry as a whole. While the existing Air New Zealand 747-400 and 777-200ER Premium Economy seats were simply an “economy plus” offering with better leg room and seat pitch, the Spaceseat was a true “business lite” offering in a 2-2-2 layout, and a unique hard shell back design meaning your seat moves forward when reclined rather than moving back which means it doesn’t cramp the space of person behind.
The outer seats were angled outwards to deliver privacy for people travelling individually, while the inner seats were designed for couples travelling together.
In pre launch testing the seat was loved by everybody who got the opportunity to test it in Air New Zealand’s not so secret Hanger 9 cabin interior development facility in Auckland. Everybody thought they had a winner on their hands - until the first 777-300ER started flying.
Within the first few months a row of Spaceseat’s was removed due to overwhelming complaints about a lack of space. This in turn reduced the number of Premium Economy seats from 50 to 44, and with a 10% reduction in seating it instantly changed the economics of the whole Premium Economy cabin. Over time it became clear the Spaceseat was a polarising product – there are those who absolutely love the Spaceseat (myself included) and those who dislike it. Many people find the recline difficult to use as you need to use your body weight to move the seat forward and back, the seat angle feels funny for others, and people who are either very tall or very short can find the seat uncomfortable and find the bean bag foot rest something that just doesn’t work. If you’re sitting in the middle seats facing outwards you also need to be careful not to hang your feet out in the aisle if you don’t want them run over by a drinks cart!
By 2013 the decision had been made not to deploy the Spaceseat in the 787-9 Dreamliner, and that this would feature a slightly customised Zodiac seat for Premium Economy in a 2-3-2 configuration. Not long after this it was also decided the 777-200ER refit would also feature this Zodiac seat rather than the Spaceseat in a 2-4-2 configuration.
At the time Air New Zealand said it was committed to the Spaceseat for the 777-300ER.
“Air New Zealand remains committed to the Spaceseat on our 777-300 fleet” a spokeswoman for the airline told Australian Business Traveller.
The new Zodiac Premium Economy seat is a regional Business class seat that has been customised by Air New Zealand. It’s being used by a number of airlines including Cathay Pacific for their Premium Economy offering. It too has a mix of people who both love and hate the seat.
Over the years Air New Zealand have won a lot of praise and industry awards for the Spaceseat. It has featured heavily in promotions and has won Skytrax awards for best Premium Economy seat on a number of occasions.
Despite all of this, if rumours are correct the Spaceseat won’t be around for much longer. Over the past few years cost-cutting within Air New Zealand been occurring with a profit at all costs mentality. It doesn’t seem to matter whether customers may like something, because if way of making extra profit can be found, it’s safe to say it will happen. It seems that the accountants have had their way and the Spaceseat will very likely be removed from the 777-300ER within the next year, to be replaced by the same Zodiac seat as the 787-9 and 777-200ER. Replacing the Spaceseat will allow additional Premium Economy seats to be fitted into the same cabin space in a 2-4-2 configuration which will in turn deliver a better return to the airline.
If this rumour is true it’ll be a very sad day indeed. I love the Spaceseat as a product, and it will be a shame to see it go.
Anybody in New Zealand who has a credit card will be well aware of the intense competition over the last few years for credit cards aligned with Air New Zealand’s Airpoints program. ANZ and Kiwibank have been aligned with Airpoints for a number of years, and in 2015 BNZ were dumped as a partner and replaced by Westpac who have aggressively marketed their cards over the past year. Simply by spending money on your credit card you will earn Airpoints Dollars and Status Points.
What most people don’t realise is how those Airpoints Dollars and Status Points are actually funded. It’s not your bank being kind - ultimately it’s you, the consumer who is funding these, in what can only be described as a huge “money go round” funded by credit card interchange fees.
In December 2015 the European Commission announced a major restructuring of credit card interchange fees, and last week Australia also announced changes to credit card interchange fees. These are currently under review in New Zealand, and I’ve heard from a few sources that pretty much identical changes will be announced in New Zealand by the end of the year.
When you use a credit card to pay for a product or service, the retailer or company you’re dealing with has to pay a fee for credit card processing to their bank or company processing their credit card transactions. This fee will depend on the size of the retailer, the number of transactions they process, and the type of card you have. For the vast majority of businesses in New Zealand this will range from around 1% up to 3% depending on whether they have opted for blended or non blended transactions (blended allows a retailer to pay the same % for all card types rather than paying a different rate for each card type), the type of merchant they are, and the type of card used. This fee includes all processing fees and the credit card interchange fee. Many retailers and companies now charge a credit card fee to recover these costs, and those that don’t simply build it into their cost of doing business. Retailers hate credit card charges which can be a significant cost of doing business, and customers hate having to pay credit card surcharges. At the end of the day as a customer you’re ultimately paying this fee, regardless of whether it’s a surcharge or built into business costs.
So what is an interchange fee? That’s a very good question, and rather than trying to reinvent the wheel I’ll simply copy the following few paragraphs from Wikipedia which sum things up pretty well :-
Interchange fee is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card based transactions. Usually it is a fee that a merchant's bank (the "acquiring bank") pays a customer's bank (the "issuing bank"); however there are instances where the interchange fee is paid from the issuer to acquirer, often called reverse interchange.
In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, usually smaller, fee for the acquiring bank or independent sales organization (ISO), which is often referred to as a discount rate, an add-on rate, or passthru. For cash withdrawal transactions at ATMs, however, the fees are paid by the card-issuing bank to the acquiring bank (for the maintenance of the machine).
When you use your credit card to purchase something, your bank generates revenue from you by way of interchange fees. These fees pay for processing, marketing and upkeep of the credit card platforms, but they are also a huge source of revenue for banks. Many people assume banks make their money from interest from people not paying their credit cards off in full, but revenue from people paying their cards off in full each money is very significant. If you spend $25,000 per year on your credit card your bank will easily be making a minimum of several hundred dollars per year just off the interchange fees they receive from your transactions.
Interchange fees in New Zealand are public knowledge and displayed on all bank and credit card websites -
Now that you understand interchange fees, you’ll now understand how banks can offer airline frequent flyer points on their cards. Banks such as ANZ, Westpac, American Express and Kiwibank who are all affiliated with Air New Zealand Airpoints buy Airpoints Dollars, Status Points and Koru lounge vouchers for a fixed price from Air New Zealand. They’re keeping a % of the interchange fee for themselves as profit, and giving you a % of this interchange fee back to you in the way of Airpoints Dollars and Status Points.
In recent years banks have heavily started pushing Platinum cards over regular or Gold cards. Ever wondered why? It’s because the interchange fees on these premium cards are nearly double those on a regular card or a Gold card. Simply by giving you a new card your bank is actually making more money from you every time you purchase something, and companies accepting your Platinum card are paying a higher fee than another customer using a regular credit card or Gold card if they’re not on a blended rate plan.
By now you’ll probably see why interchange fees have become a big money go round. At the end of the day you’re paying a surcharge to simply get a percentage of that surcharge given back to you. It’s an issue that competition regulators and central banks around the world take issue with, and something they’re now doing something about. In 2006 in New Zealand and Australia both the ACCC and Commerce Commission took action against the credit card companies in what can now be seen as a dismal failure for both competition regulators. Their legal action has backfired and ultimately sent fees upwards.
In 2006, the New Zealand Commerce Commission issued proceedings against Visa and MasterCard, alleging that interchange fees constitute price fixing and result in a substantial lessening of competition. Shortly before the court case was due to start in Autumn 2009, the suit was settled out of court; the "no surchage rule" was prohibited, allowing retailers to pass on the cost of MasterCard and Visa transactions to the customer, and card issuers were allowed to set their own interchange fees, within a maximum limit set by Visa or MasterCard. All issuers of MasterCard cards in New Zealand announced they would be charging the maximum rate. The Commission released a report in 2013 reviewing the outcome of the settlement, showing that many merchants were paying higher fees for accepting credit cards than before the settlement.
In 2015 the European Commission announced a significant clampdown on credit card interchange fees to improve transparency in the marketplace. Interchange fees were slashed to a maximum of 0.2% for debit cards and 0.3% for credit cards.
In Australia this week the Reserve Bank of Australia announced the outcome of it’s long awaited review and has slashed interchange fees to a maximum of 0.8%, a drop of over 50% from the rate of many premium cards today. It has also announced that flat rates for credit card surcharges (such as those charged by airlines) will be outlawed and all credit card surcharges must be a percentage component, and cannot exceed the true cost the retailer pays for credit card processing.
Interchange fees are currently under review in New Zealand and it’s expected that we’ll see similar changes announced by the end of 2016. This will be a significant win for retailers who will see processing fees drop, but it’s going to be a very difficult time for banks. They’ve sold customers on Airpoints cards and earn rates that will simply no longer be sustainable, and it’ll be realistic to see earn rates on Airpoints Dollars and Status Points cut significantly, potentially slashing earn rates by at least half.
Likewise for Air New Zealand there will be plenty of change for their business – selling Airpoints Dollars and Status Points to banks is a multi million dollar business for the airline that will be significantly disrupted as banks give away far fewer Airpoints Dollars and Status Points. Assuming that flat rate credit card surcharges are outlawed in New Zealand, Air New Zealand will also see it’s credit card surcharge replaced by a percentage fee, something that will no doubt be both loved and hated. Right now if you’re a passenger buying a $39 airfare you have to pay $4 (nearly 10%) to pay that airfare with a credit card, a fee that means the airline are profiteering from you to subsidise a business class customer who’s paying $17.50 (.35%) on their $5000 Business class airfare. Air New Zealand deny that credit card surcharges generate a profit and that they “all average out” at the end of the day. Such a change will ensure that all such charges are fully transparent to customers and that Business class customers pay the true cost of their credit card payment and are not being subsidised.
Such changes are going to be equally liked and hated by customers but at the end of the day it delivers transparency to the payments process. If you’re addicted to points then it’s time to enjoy the ride while it still lasts, because its likely to end very abruptly in the not too distant future.
IMPORTANT UPDATE: As of the 6th April (the day after this went live) Air NZ have had a “policy change” that now means these new P class fares CAN NOW be upgraded like other classes of fares. This means that F class (Grabaseat) fares are the only revenue fares that can’t be upgraded.
If you’re a frequent flyer like myself you’ll enjoy the benefits of upgrades when travelling on Air New Zealand. If you’re Airpoints Silver, Gold or Elite you’ll receive Recognition Upgrade(s) that can be used to upgrade to the next booking class, ie from economy to premium economy, or from premium economy to business premier. For those who don’t have Recognition Upgrades, AIr NZ operate a PlusGrade platform known as OneUp that allows you to bid for an upgrade, or if you’re Airpoints Elite you can upgrade by purchasing an Elite Standby Upgrade.
All of these upgrades are available on regular paid booking classes. For travel to the US these classes are as follows -
Economy - K/G/S/L/T/W/V/Q/H/J/M/B/Y
Premium Economy – A/O/E/U
Business Premier – J/Z/D/C
For the past few years Air New Zealand have been promoting cheap international flights on their Grabaseat website. Many of these flights (particularly to North America) are in a special promotional fare class known as F class. Bookings made in this class are non upgradeable, meaning you can’t use any form of upgrade to escape economy class. It’s important to note as well that F class airfares are ONLY available from the grabaseat booking engine, they can’t be booked on the main Air NZ website, or a travel agent via GDS.
From the Air NZ website :-
Airpoints Upgrades are not available on all Air NZ operated and Star Alliance operated Flights. For example, Airpoints Upgrades cannot be requested for Companion Tickets, travel industry fares, prize and promotional Tickets, grabaseat™ greenlight fares and Flights booked in certain discounted or low cost booking classes, including F class..
Over the past week Air New Zealand have been offering some pretty good deals to the US with fares as low as $899 return. These fares have been available from the Air NZ website along with travel agents via GDS.
What Air NZ have failed to mention is the introduction of a new booking class – P, which is being used for these flights, is non upgradeable. If you book a P class fare you can’t use a recognition upgrade, OneUp, or Elite standby upgrade. Don’t go hunting for this mentioned anywhere because you won’t find the rule – it’s not listed anywhere. Your fare simply can’t be upgraded on the Air NZ website, and a call to the call centre will confirm this. There is also no mention of this in the fare rules so a travel agent booking this would also be unaware of this new restriction.