15 November 2014

Another nail in Kaitaia's coffin

Air New Zealand's review of its regional aircraft operations will cost Kaitaia its twice-daily service to and from Auckland. Whakatane and Westport will also lose their services. The cuts are designed to save the airline the $1 million it claims to be losing on regional services every month. The company has declined to tell Mayor John Carter how much Kaitaia was contributing to that loss. Chief executive officer Christopher Luxon said the airline had been looking at how to address the "poor operating economics" of its 19-seat aircraft while leveraging the significant economies of scale available from its 50- and 68-seat fleets. "The 19-seat aircraft is the smallest in the Air New Zealand fleet, but has the highest cost per seat to operate because the fixed costs of operation are distributed across fewer passengers. This has led to Eagle Airways, which operates the 19-seat fleet, losing $1 million per month for the past two years, or the equivalent of $26 per one-way passenger journey." It had also become clear that demand for seats was strengthening on some regional routes. The company had begun increasing seats in those areas, and would be accelerating that process with an additional $100 million investment in four new 68-seat aircraft. It would "exit" its 19-seat fleet by August 2016. "Our average regional air fare has fallen by 2 per cent over the past five years, and today's announcement will keep further downward pressure on regional airfares," Mr Luxon added. "On the 13 routes that will move from 19-seat aircraft to more cost-effective 50-seat aircraft we expect to deliver a 15 per cent average fare reduction." That, he said, was good news for towns including Kerikeri and Whangarei. The Kaitaia/Auckland service would end in April. Mr Luxon accepted that the news would be disappointing for some communities, but the airline remained "resolutely" committed to regional New Zealand, and the changes would set up its regional business model for future sustainable success.

Another nail in Kaitaia's coffin
Federated Farmers' Northland president Roger Ludbrook has described the loss of Kaitaia's Air New Zealand service as "slamming another nail in Northland's coffin". "Kaitaia is a typical example of how National will not support Northland," Mr Ludbrook said. "I am sorry for Kaitaia, and sorry for MP Mike Sabin. He is a good man who has not been able to affect Air New Zealand's decision, because Northland National MPs have no power or influence in Parliament. "I believe this move by Air New Zealand is simply an example of what economist Shamubeel Eaqub referred to as 'zombie towns'. Kaitaia is just a provincial town that Wellington will allow to die, because they need the votes not from the provinces but from the urban centres. So that is where resources will be spent. "This move by Air New Zealand is a short-sighted tragedy, because New Zealand's spending is done in the cities, whereas wealth in this country is created in provincial townships like Kaitaia. "It will just make it more difficult for people to do business in Kaitaia and the Far North, meaning more businesses will leave and creating new businesses will become even harder." Far North Mayor John Carter was outraged, but was not yet despairing. The district council would urge the airline to reconsider its Kaitaia decision, and to recognise that the daily service was an important part of the Far North's transport infrastructure. "It helps keep Te Hiku Ward on the tourist map, and is a sign of confidence in our economy," he said. He was also disappointed that Air New Zealand told council representatives and MPs of its decision the same day it announced it to the media. "We have developed a good working relationship with Air New Zealand, which has delivered significant benefits to the district. It is unfortunate that we were not given a proper opportunity to work with the airline to fully explore options that could improve the viability of the route," he added. Far North Holdings chief executive Andy Nock said he believed the Auckland-Kaitaia service could be economically viable if a more efficient 50-seat aircraft was used and the first daily flights to and from Auckland were rescheduled to earlier times. He too was unhappy at the way the announcement was made. "Air New Zealand indicated to us some time ago that they needed to improve the commercial viability of this route," he said. "We had established a positive dialogue about growing the service on the back of tourism growth in the area. We are very disappointed that they have not been willing to take a longer-term view of this route, and that they told us about their decision after the press release was issued." Absolute disasterTe Tai Tokerau MP Kelvin Davis described the loss of Kaitaia's service as "absolute disaster". "Air New Zealand is sending a signal to the rest of the country that the North is closed for business," he said. "It does nothing to remedy an already tough economic climate in the North, and will make it even more difficult to attract investments in an area that is already suffering hardship. "Air New Zealand did not consult with the community on any changes. Its decision to generate profit for its stakeholders obviously outweighs any corporate responsibility it has for Far North communities," he added. Labour's transport spokesman Phil Twyford said cutting services in already struggling regions was a hammer blow for Westport, Whakatane and Kaitaia. The regions were being abandoned by the government at a time when falling dairy prices meant they needed help the most. "Now Air New Zealand is twisting the knife. Regional air routes are economic lifelines to these places," Mr Twyford said. "The loss of an air route to Westport, Kaitaia and Whakatane is cutting them adrift from the national economy." It was clear that this had been in the pipeline for some time, with exorbitant prices for regional fares a softening-up exercise, but the government was still the majority shareholder of Air New Zealand, and it was time John Key sat the board down and explained to them their duties as a national carrier, including providing affordable air routes to regional centres.

Happy to fly

Tauranga company Sunair Aviation Ltd. is offering to provide scheduled air transport from Kaitaia to Auckland on the withdrawal of Air New Zealand's service in April. Chief executive Dan Power said he was confident that the 25-year-old company could provide a safe and reliable service, given that it had been offering regional air links throughout the central North Island, accident-free, for many years.

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