Air New Zealand (ANZ) will close its low-cost subsidiary Freedom Air at the end of March.
The move follows ANZ's decision to split its own economy class into two sections on both domestic and Australian routes. The back of the cabin will have tighter seating, with snacks and in-flight entertainment offered on a user-pay basis. By copying low-cost service standards and offering fares comparable to a low-cost carrier, ANZ concludes it has little reason to keep Freedom Air as a separate brand.
"The reality is that the price of airfares has fallen dramatically over the past 10 years," says ANZ deputy chief executive Norm Thompson, "and today there is little difference between Freedom and Air New Zealand fares".
Closing Freedom will raise ANZ's labour costs because of Freedom's lower pay scales, but ANZ concludes this is offset by other benefits of merging the brands. ANZ has progressively been reducing Freedom's role for some time. Two years ago it pooled the trans-Tasman fleets and cabin staff of both carriers. A year ago it ordered Freedom Air to drop routes to the Pacific islands and Brisbane because they were competing with ANZ.
Some analysts question the decision to drop Freedom. They claim it will limit ANZ's options at a time when it faces more competition from low-cost carriers.
Source: Airline Business
