Domestic airfare increases stifling growth

Published: Thu 30 Aug 2012 02:46 PM
Domestic airfare increases stifling growth
“Airports are pleased to see Air NZ has today announced a result ahead of expectations, but can’t see how it has determined domestic airfares have reduced and airport charges have doubled,” says Kevin Ward, New Zealand Airports Association Chief Executive.
Data from Statistics New Zealand shows domestic airfares in New Zealand have increased by 28% since the second quarter of 2010 – which is when Pacific Blue exited the domestic market. This increase equates to an additional cost of around $70 on a return airfare costing $250 two years ago.
In Australia, domestic fares have remained flat while the market remains profitable with continued investment in aircraft.
“Air New Zealand’s reported yield on domestic airfares is nearly three times higher than its international yield.”
The Association is concerned about the stifling effect the actual increases could have on consumers and the domestic air travel market.
Mr Ward says air travel is closely linked to the success of regional economies. “High fares discourage travel, whether its tourists or business travel or visiting friends and family. This increase in fares is bad news for many regions.”
“I’m perplexed that Air New Zealand says domestic airfares have reduced or could have been reduced further. Airport charges are a very small fraction of domestic fares, and the average charge per passenger is barely more than the credit card fee charged by the airline.”
Mr Ward also points out that in markets where there is strong competition, such as Auckland, Wellington and Queenstown, the market has grown substantially and there have been fare reductions, while demand in areas served by a single carrier has declined.
“The regulatory framework for airport charges has been reviewed in recent years and represents best practice. Price control on airports is attractive for the dominant airline, but very bad for New Zealand overall. Air fares wouldn’t necessarily come down – those depend on other factors.”
“The big risk is if an airport doesn’t recover its real costs it will fall behind the growth in passenger numbers, the larger aircraft coming on the scene, and maintaining safety standards. Each region depends on its airport to keep up with essential runway and terminal works,” says Mr Ward.

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