Middle-Earth Express Air New Zealand to Begin Direct Flights to SFO

Middle-Earth Express Air New Zealand to Begin Direct
Flights to SFO 
San Francisco Chronicle, CA

Tuesday, January 27, 2004 
  
Air New Zealand, capitalizing on the rousing success
of "The Lord of the Rings'' movies, which were shot in
New Zealand, will become the first new foreign airline
to serve the billion-dollar international terminal at
San Francisco International Airport since it opened
just more than three years ago. 

The announcement, made Monday at City Hall by Mayor
Gavin Newsom, airport Director John Martin and New
Zealand officials, was a welcome bit of good news for
SFO. The airport, Northern California's largest, has
seen its number of available seats plunge 28 percent
from December 2000 to December 2003 as cash- strapped
airlines reduced capacity. News of added flights,
however modest, suggests that transpacific traffic, an
important component at SFO -- which relies on service
to Asia and the South Pacific -- could be ready to
rebound. 

"We made a major investment in the International
Terminal. It's there that we want to see growth,''
said Martin, who said he first approached Air New
Zealand about flying to San Francisco four years ago. 

Martin has also wooed domestic low-cost carriers such
as AirTran Airways, America West Airlines and ATA
Airlines, snaring nine additional daily flights since
November. 

Word of the new SFO-to-Auckland service, which begins
on June 30 with three direct, nonstop overnight
flights a week on jumbo Boeing 747-400s, came on the
same day that Moody's Investors Service issued a mixed
report on the airport, which handles more than 80
percent of the Bay Area's international flights. 

Moody's issued an A1 rating to a $36 million bond to
be used for refunding part of the principal on the
airport's debt. That is a solid investment-grade
rating, below the top grade of AAA and second-best
AAA-2, Moody's analyst Maria Matesanz said. Moody's
has also assigned SFO an overall A1 rating, on $4.2
billion worth of airport revenue bonds. But the high
marks come with a negative rating outlook and several
caveats. 

"The ratings,'' observed Moody's analyst Kevin Carney,
"reflect the lack of recovery in passenger traffic
from a very steep decline, very high airline payments
for facilities, high debt levels and the continued
weak financial condition of the airport's dominant
carrier, United Airlines.'' 

The International Terminal opened to rave reviews in
December 2000 for its soaring architecture, relatively
high-end retail and food and beverage outlets, and
general air of modernity. But beginning with the tech
downturn and the terrorist attacks of Sept. 11, 2001,
international traffic plunged and the expansive
terminal began to look empty. Several of the showcase
terminal's gates are presently unused. 

Over time, the analysts said, Moody's expects SFO to
come out of its slump, thanks to its prime position on
the West Coast, strong commercial and cultural ties to
fast-growing China, and status as a major airport that
is both a destination and a point of origin for
thousands of travelers. 

SFO's major tenant, United, which handles about half
of all passengers and flights at SFO, went into
Chapter 11 bankruptcy protection in December 2002.
United customers with Mileage Plus frequent-flier
miles will be able to use them by booking the new
flights on Air New Zealand, one of United's Star
Alliance partners, said United spokesman Stephan Roth
said. 

San Francisco, Roth said, is the most profitable
overseas hub for United, which discontinued its own
direct service to New Zealand about a year ago. United
should benefit, he said, from the new service on Air
New Zealand, which bills itself as "the airline to
Middle-earth,'' the fictional setting for the "The
Lord of the Rings.'' 

Like United and other major U.S. carriers, SFO has
been badly hurt by post-Sept. 11 fear of flying, the
prolonged economic downturn, last year's war in Iraq
and last spring's outbreak of severe acute respiratory
syndrome. 

To pump the numbers back up, Martin said, the airport
has offered to cut fees in half for one year for
airlines that begin serving new destinations from SFO.
The Air New Zealand deal qualifies for that program,
Martin said. 

Air New Zealand, a relatively small carrier, is
seeking a closer alliance with Australian airline
Qantas Airways in an effort to gain economies of scale
on long-distance, international routes. That plan has
been stalled by regulators Down Under. 

However, buoyant airline officials portrayed the San
Francisco-Auckland service as a win-win for the
airport and airline, which will continue to operate 17
flights a week from Los Angeles to New Zealand. 

The SFO service will reduce travel time to and from
Auckland, New Zealand's most populous city, to 12
hours from 15 to 17 hours now, airline officials said.
Currently, SFO passengers have to change planes at
LAX. 

Gus Gilmore, Air New Zealand Western region vice
president, said low introductory fares will apply in
June, when Air New Zealand will offer round- trip
fares of $747 in economy class, $2,800 in business
class and $4,800 in first class -- about 60 percent
off across the board. 

New Zealand hopes to lure American tourists to kiwi
territory, a bounteous expanse of mountains, glaciers,
forests and clean, modern cities. The island nation of
4 million has received wide exposure in recent movies,
especially in the "Lord of the Rings'' trilogy; in
"The Last Samurai,'' the latest starring vehicle for
Tom Cruise; and "Whale Rider," a New Zealand film
about a Maori girl who struggles to assume the
leadership of her tribe. 

"Californians are among our most frequent visitors,''
said New Zealand's Consul General Darryl Dunn. "They
will discover in New Zealand another California -- one
somewhat less populated. The people, the scenery, the
food and wine make them all feel immediately at
home.'' 

New Zealand also hopes to capture traffic to and from
Silicon Valley through an office in Redwood City that
that country's government opened this month, to aid
entrepreneurs in information technology and other
high-tech ventures. 

"Analysts are still working out whether high
technology is making a comeback from the recent
recession. New Zealand has never doubted the Bay
Area's destiny as the global leading edge for high
technology, and we mean to have a stake in its
future,'' Dunn said. 


 

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