Air NZ joins government's cross-agency panel for air travel

Air New Zealand has joined the panel of carriers providing air services in the government's cross-agency contract designed to get the best deal for the taxpayer.

Subject to government sign-off, the national carrier will be another addition to the panel, which expands the number of airlines government departments can fly with. The new agreement is for a four-year term, with potential for three two-year rights of renewal.

Air New Zealand and other unnamed airlines were still in negotiations when the Ministry of Business, Innovation and Employment (MBIE) announced a number of carriers allowed to ferry public servants earlier this month. The new deal is set to come into effect next month.

"We're delighted to be reappointed to the panel of carriers to support the government's flight requirements," Air New Zealand chief revenue officer Cam Wallace says.

"As New Zealand's national carrier we have a long-standing relationship with the government and a track record of delivering value to public agencies."

Former Economic Development Minister Steven Joyce asked for the contract to be retendered last year as heightened competition prompted a review of the benefits from all government procurement, which had delivered $37 million in savings for the Crown.

The contract is currently shared by national carrier Air NZ, Emirates, Lufthansa, Qantas and Singapore Airline. Air NZ had been the sole supplier for domestic routes but has since faced increased competition from an expanded Jetstar offering and the introduction of several smaller regional airlines.

Air New Zealand joins Emirates, Etihad, LATAM, Lufthansa and Austrian and Swiss airlines, Qantas Airways for international routes and Jetstar on domestic, Singapore Airlines, Sounds Air, United Airlines and Virgin Australia.

Auckland-based Air New Zealand reports tomorrow and is forecast to post a 45% drop in first-half earnings to $186.5 million on a 2.6% decline in revenue to $2.63 billion, according to Forsyth Barr analyst Andy Bowley.

Air New Zealand was granted an NZX waiver from having to seek shareholder approval, given the deal is a material contract for its majority government shareholder.

In its 2016 annual report, the airline's auditor Deloitte deemed materiality for the company to be $30 million, which represents 5% of pre-tax profit, 1% of total equity and 1% of operating revenue.

The shares are unchanged at $2.155 and have dropped 6.1% over the past 12 months.

(BusinessDesk)