Air New Zealand focuses on the premium

It is rare that a New Zealand company captures the global attention of the industry it is in, particularly one primarily state owned. Given that Air New Zealand retains minority private ownership, as is publicly listed, that has ensured that political pressure on how the airline runs its business has been very limited. However, it has also meant it has lacked capital to expand, so has focused on its core business.

The new long haul products announced today are reviewed on my airline service blog here. For economy class it is quite revolutionary for those taking the Skycouch, but is no overall advance for others in economy. in premium economy it becomes best of its class with maybe only one rival (although the legroom has been cut), whereas business premier is more of a tweak rather than a serious change.

From a business perspective what is particularly interesting is how dominant the premium cabins are becoming for the airline.

At present services from Auckland to London via LA, and some other services to Vancouver, San Francisco and LA are operated by Boeing 747s with the following configuration:
46 Business Premier
39 Premium Economy
294 Economy
= 379 passengers.

These are to be replaced with Boeing 777-300ERs, which are smaller than 747s but larger than the current fleet of Boeing 777-200ERs. However, look at the seat configuration:
44 Business Premier
50 Premium Economy
246 Economy (including 66 that will convert into couches for 44)
= 340 passengers

In essence, Air NZ is giving up mass market cheap economy class for targeting more discerning tourists, while focusing more on upmarket tourism and business travellers. Bear in mind that few know one of Air NZ’s most profitable routes is LA to London, because the fares that can be charged on that route are almost as high as Auckland to London – although it is a fraction of the cost to service. However, tourism from the UK to NZ has dropped dramatically due to the recession.

It is betting that given its cost structure is mid range among its competitors (Qantas is higher, Emirates and Malaysian are lower), it needs to pitch itself with something to attract discerning travellers. Not the bargain basement lot who are price focused and who really don’t care about legroom or food.

Still it faces a struggle for growth, given that it is undercapitalised and has missed out on realistic opportunities to plunder the Australian market (but that’s another story of corporate blunders combined with government interference).

Now is not the time to sell, but as the majority shareholder, it would be wise to consider at least some sell down of the airline ownership to get some new capital. Ultimately it will need a strategic shareholding by another carrier to have any serious hope of expansion, which means the word that too many in New Zealand politics are far too scared of – privatisation.

I've reviewed all of the product enhancements on my airline service blog:

The business case
Economy Class
Premium Economy
Business Premier
Catering and entertainment
How competitive is it?
Images of the new products

However if you want my quick summary of it all:

Economy - Skycouches are great for couples, but everyone else loses a little width and legroom. Most economy passengers are slightly worse off.

Premium Economy - A significant improvement with far more width, space and better seats, but the same recline. This isn't as good as business class used to be in terms of recline, and at 36" seat pitch it is frankly the worst for legroom in its class.

Business Premier - Business as usual, little change here, except the catering will leap ahead with freshly cooked food, not reheated.

It will first be seen on the new Boeing 777-300ER, the longer larger version of the current 777-200ER. The 777-300ER (dubbed 77W in the industry) will replace 747s for Air NZ, which means sadly losing the upper deck and nose cabins, both far more exclusive than main decks (with only one seat either side in Business Premier).

The first routes will be Auckland-LA and Auckland-LA-London. The existing 777 fleet will also be progressively retrofitted.

Some industry media coverage:
Business traveller
Flightglobal
Wall Street Journal

NZ Herald has great images of the economy seats
NBR has different coverage
Air NZ website has three press releases and a new website to reveal more in a week.

UPDATE:

Apparently Air NZ got a design company to profile passenger types - and they match Simpsons characters. I'm not thrilled to be a blend between Lisa Simpson and Mr Burns.

Full set of photos on flickr here.

Labour thinks you're too stupid to lose weight

Labour Health spokesperson Ruth Dyson says this "The Government apparently thinks people will simply be able to change their diet and exercise without any assistance or form of nutrition education"

I'm astonished. Changing your diet is impossible without the government. The carefully hidden knowledge that eating mostly vegetables, fruit, lean meat, fish and cereals, and avoiding high fat and high sugar foods helps you lose weight is something that almost nobody knows surely. In addition, without the government how COULD people go to the gym, or go for a walk or swim?

Does anything more clearly show the patronising and condescending attitude the Labour Party, and indeed many statists have for the general public than that? The idea that without the government, people can't look after themselves, don't know any better and wont change.

Ms. Dyson might wonder if one of the reasons Labour became far less popular is that people are sick of being treated as imbeciles, and sick of being forced to pay for bureaucrats to hand hold people.

If people get obese and do nothing about it, then it isn't anyone else's business. If you want to address rationing the health system, then maybe linking its provision to what people pay for it, might make a difference. Imagine, for example, if most people had health insurance and paid more every year if they were deemed to be obese. How much of a better incentive would it be if you paid more for healthcare because of your risk factors, than for some patronising do-gooder to give you nutrition education and tell you to exercise more?

Why is it that so many politicians prefer telling people what they should do than have them face the costs of their actions?

Matt McCarten wants your money

Given he believes in a bigger state, he believes in compulsory welfare, state monopoly education and health care, it is hardly a surprise.

However, he has an odd view of "fairness".

He thinks, as do most socialists, that the imperative behind those supporting the free market in wanting lower taxes is greed. They think simply that people who are relatively successful want more of their own money and to hell with everyone else. The concept that we actually are suspicious of an ever growing state, see abject failure in the state addressing poverty and social mobility, is beyond the likes of Matt.

You see he loves the state, the state for him is the embodiment of humanity. It is a democratic expression of the "people's will" and it both protects and serves. The more it does, the better we all are for it. Given Matt spent much of his political career advocating for the Alliance, an openly socialist political party, this is hardly surprising. He sees the state as an instrument to take by force from those he deems rich to give to those he deems poor - the rich implicitly having not earnt their money "fairly", and the poor, well it isn't their fault, is it?

Matt says: "We need our public services". Hold on. Who is this "we"? Most would accept that they need health care and education, but separating who pays for it from who provides it creates all sorts of problems of performance. Matt doesn't believe this though. He thinks that when people pay taxes they can keep the state health and education sectors accountable for what they receive, even though it's clear that this works rather badly. However, he has spent much of his life representing suppliers, as in workers. He hasn't ever represented consumers of services, and certainly not those paying for it.

He then goes into his favoured taxes, like capital gains tax and death duties. Then he brings up the tired old nonsense of financial transactions tax, without blinking an eyelid as to how the financial sector could avoid much of it by engaging in most transactions offshore.

He says "Most of us wouldn't even notice it. But those who buy big-ticket items would. That's why the ruling class won't do it.". If Matt put down Das Kapital for a second he might think that "big ticket items" might get bought offshore with offshore bank accounts, and there will be other useful techniques to avoid the tax. However, he's cleverer than those who seek to protect their money.

That's a phrase he doesn't understand. To Matt (and many others on the left) taxes are not the money of those who own it, but the state's money - so it can be used for the benefit of the vested interests who best convince politicians to spend it on them and then all others.

Then he makes something up: "Twenty-five years ago we were told that if we cut taxes for the rich and raised taxes on the poor then we would work harder and earn more. It was nonsense then. It's nonsense now."

Who told you that Matt? Who ever called for raising taxes on the poor? In fact, name ONE report or one person who ever supported this? It's a bright Marxist red herring, as nonsense as he says.

The bigger argument is what the role of the state should be. The welfare state in its current form has produced a culture of dependency and entitlement that is not earnt, and needs to be urgently addressed. By keeping those who pay for health and education far apart from those who deliver it, patients and parents find it difficult to influence outcomes and to ensure that those providing those services are accountable to them.

Other countries have adopted significantly more consumer friendly approaches to both health and education that are hardly radical. Sweden's voucher approach to education is difficult to rebut as a significant first step to increasing diversity and accountability for that sector. Singapore's approach to health care has also resulted in far higher degrees of accountability for service delivery, and a greater interest by individuals in their own health care.

Matt prefers the world of - you earn more, you consume less, then you pay more taxes to pay for the health, education and welfare of everyone else (few of whom are ever grateful for it). He likes state monopolies in those sectors so that the workers can command ever increasing incomes from taxpayers by organising themselves as labour monopolies, so that there are more workers, less work and more pay.

You see the very greed and so called selfishness Matt attributes to the rich is exactly what the trade union movement of which he is a part of, demands for its members.

Absolutely none of it is to do with fairness, none of it is to do with users of state provided services and certainly none of it is to do with taxpayers getting value.

It's just from each according to their ability to each according to their means for Matt.

So what would Obama's proposal have prevented?

Nothing, in the UK in any case.

Allister Heath in City AM - the UK's only consistently pro-capitalist newspaper - says:

Barack Obama’s plan to ban banks with retail arms from those activities – endorsed by shadow chancellor George Osborne – would have done nothing to prevent the crisis; not a single bank that got into trouble since 2007 would have been saved had those rules been in place.

Why?

Northern Rock, HBOS, Bradford and Bingley and the Dunfermline did not engage in prop trading. They lent to people who couldn’t repay, assumed property prices wouldn’t fall, relied on money markets for funding rather than deposits, and purchased securitised sub-prime debt as a “safe” high-yielding investment, often tucked away in off balance sheet vehicles. They held too little quality, liquid capital as a buffer against losses.

So you see it's a mirage. What about RBS?

It was over-leveraged, bought vast amounts of sub-prime securities, lent willy-nilly to unsound borrowers and blew a fortune buying ABN Amro, suffering massive goodwill write-offs. RBS made every mistake in the banking book; it would have been doomed with or without Obama/Osborne.

The Tories are jumping on the bandwagon for political reasons. It makes them look like they aren't beholden to rich capitalists in the City of London, and helps attract the envy vote across the country. At the same time the British government, to its credit, is NOT jumping on the bandwagon. Gordon Brown, for all his faults, is smart enough to not frighten the sharemarkets even more by blundering into nodding in unison with Obama.

Funny though how those on the left who would decry the UK following in step with the US when it was Blair and Bush, now want Brown to follow Obama. Funny that it isn't about making your own decisions, but about making decisions they agree with.

A Guardian poll showed nearly 100% support for doing so, but then who reads the Guardian besides those who think the state should intervene in more, except when it comes to overthrowing nasty dictatorships in the Middle East. So of course it has articles saying "yes Obama", as does the Independent and even the Telegraph is conditionally supportive.

It is deeply unfortunate that many who understand the financial sector are typically without much knowledge of public policy or political philosophy. Indeed, the reverse is true with many political pundits, bureaucrats and journalists not understanding the financial sector.

In the meantime too many are prepared to blame anyone but themselves, and to find solutions that are about addressing symptoms not causes.

Child protection law misdirected

There should be some irony in seeing that the day it is announced that parents will be able to check neighbours, friends or partners to see if they have convictions for being a pedophile, that the two parents of the Edlington sadists have name suppression.

The children who are the victims of their children are reportedly frightened that the sadists, who have permanent name suppression and will get new identities, (thanks to the mugs who paid for them and their parents to be fed, clothed and housed), will kill them once released. The other disturbing element is that the two victims no longer wish to associate with each other, in part because the sadists forced them to perform sexual acts on each other.

Allowing parents to ask the Police to check whether an individual has a "child sex offence", seems reasonable to most parents. However, there are a whole range of serious flaws in the idea.

1. The definition of "child sex offence" isn't clear, but it is plausible that it will catch those guilty of relatively minor offences - the classic teenage "oops she was 15, I thought she was 16" situation, where there is consent and the "offender" is only a few years older. However, that person will be deemed to be a "child sex offender" as much as someone who brutally abducts and rapes small children. There is no equivalency between them, but it will greatly hinder the rehabilitation and reintegration into society of those who have essentially committed victimless crimes. Surely if it is to happen, shouldn't there be a definition that weeds out the latter cases?

2. The hysteria about child sexual offences alone has left out the obvious. Rapists and anyone who commits violent offences are completely ignored. What mother would rather know if the man they are going out with is a rapist - of women - or has served time for bashing a previous woman? Why is this not important, or is it part of the modern day hysteria that treats only those who commit sexual offences against children as dangerous. Those who beat children or rape adults are somehow not seen as a risk.

3. If there are child sex offenders in public today that pose such a risk, should they even be out? Surely sentencing should reflect danger to the public and the top priority has to be protection. In an environment when the state is seeking to cut time in prison across the board to save money, surely a better effort would be to ensure sentences of those likely to re offend are sufficiently preventive?

4. Should there not be a bigger debate about what to do with information about convicted criminals? Should everyone have the right to know who has done time for violent, sexual and property offences? Wouldn't you like to check your real estate agent for fraud, your daughter's new boyfriend for violent offences? Or does that put a serious barrier in the way of rehabilitation?

5. Doesn't allowing such checks simply produce a false sense of security? The two boys tortured in Edlington would not have been protected because their assailants were minors too. A significant proportion of child abuse happens in feral homes, committed by people who are never convicted or even charged. Does making such a check become an easy substitute for being cautious, not leaving your children with people you don't know? Indeed shouldn't the best step be to have enough communication between children and parents that when the kids don't like someone, because of what they say or do with them, that parents listen?

This sort of proposal is driven by politicians seeking to get good publicity months out from a general election, a desire to "do something" rather than consider the whole criminal justice framework around protecting children and media hyped hysteria about high profile cases.

A better response is the following:

1. Preventive detention to be used more often for multiple repeat offenders and those who are considered to present, on balance, a real danger to the community. This applies also to minors who are offenders.

2. Applying a sentence of custody denial for anyone convicted of serious violent or sexual offences (including those against children). Intergenerational abuse and criminality is a key problem, and it is about time that parents who abuse are no longer permitted to live in the same home as other children. Why are abusers allowed to breed and raise children, but not allowed to work in schools? Is it less of a concern to make your own victims?

3. Promote self defence techniques for children and the means for them to safely advise trustworthy adults (i.e. at school) if they are frightened or abused.

4. Criminal negligence charges for Police or child protection authorities who ignore multiple reports of offences against children. The Edlington case is a palpable example of this.

5. Permanently deny welfare including housing to all convicted serious violent and sexual offenders. Taxpayers should, at least, not be forced to pay to sustain those who have harmed them. Let them be at the mercy of charities who will spring up to help. Let's not allow them to populate already tragically depressed housing estates and live their lives in leisure in front of TV.

6. Consider how and whether the general public should have access to criminal records of other citizens. Sexual offences are one thing, but so are violent and property offences. Would this make people safer or would it simply result in all criminals being incapable of living lives outside prison without criminality? Would it be a deterrent or would it allow like minded individuals to find each other and collaborate?

It's important to bear in mind that neither the Edlington case, nor the Jamie Bulger case, nor the Huntley case would ever have been prevented by the measures now proposed. Edlington COULD have been prevented by the Police and Child Protection Services, as the offenders had committed multiple violent and property offences over the years.

However governments rarely point the blame at themselves, make themselves accountable personally and financially, and seek radical changes to try to prevent similar occurrences.