24 August 2019

The age-old question of competing with the national carrier





This is an interesting article that once again raises the age-old question of competing with the national carrier. 

This blog records the history of airlines that have tried to compete with the national carrier (and have failed) and those who have found a niche.

Of course there are those who will knock the national carrier - but they, like any airline, have to make a profit. And a small airline using small aircraft can't offer the same sort of fares. 

So is there a solution to a competitive regional air service???


Jetstar pulling its Hawke's Bay service would be a "disaster", claims one Hastings District Councillor. Speculation is swirling that Jetstar may stop regional services, including Hawke's Bay, after it was revealed the carrier is making a loss on provincial services. Simon Nixon, who has been a longtime advocate for better air services into the region, said Jetstar pulling Hawke's Bay flights was one of his worst fears. "If it happens it will be a disaster. My experience of Air New Zealand is, given a monopoly, they will exploit it for all it's worth." He said there had been a 50 per cent increase in passengers at Hawke's Bay Airport since Jetstar introduced flights to the Bay in late 2015. "The numbers are about quarter of a million extra passengers." He said Hawke's Bay is isolated, and in order to compete with other cities around New Zealand for events such as conferences, the airport needed to remain competitive. "Like it or not, you're pushing it to do five hours to Auckland, six or seven is probably a better estimate, four to Wellington." "We're competing with places like Rotorua, from Auckland you can get there in maybe two hours." He said councils need to be looking at the issue and come up with a strategy to make sure it doesn't happen. "And we need to be talking to New Plymouth, Whanganui and Nelson as well, all of whom could be similarly affected." Air Napier chief executive Shah Aslam said he was watching the situation with interest. Currently Air Napier flies between Napier and Gisborne, with plans to do more region-to-region flights in the future. Aslam said if the space opened up for them to fly between Napier and Auckland, which is the current Jetstar route, it is definitely something they would consider. Flights would not be as cheap as the current Jetstar flights however, as Aslam said they were not looking to make the same mistakes. He said they wanted to focus more on customer service, rather than offering cheap flights around the $30 mark. Nixon was sceptical about the ability for a smaller carrier to compete with Air New Zealand. "The whole history of Air New Zealand is if a weaker competitor arises on the scene they just put them out of business. "They either buy them out, as they did with Air Nelson and other small airlines ... or alternatively they drive them out of business."

28 comments:

  1. Facepalm...... Sigh.. Its FMS all over again haha. Let's hope Air Napier sees sense and if JQ were to depart the NZ regional market, they wont rush in and do something silly.

    On another note, how on earth would Wanganui be affected by JQ pulling Regional services??

    I'm not thinking JQ will pull the pin completely, but maybe some scaling back of services

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    1. 1st and 3rd point - agrred.
      2nd point I think the councellor got Whanganui confused with Palmerston North which he doesn't mention.
      The irony is though that Air Chats running Saabs, CV580s and now the ATR72 out of Whanganui in place of Air NZs overpriced B1900D offerings has probably hit Jetstar's PMR operations far more than Air NZs. Just read the feedback on Air Chats facebook page - there are a disproportionate number of ex Jetstar customers.

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    2. You are right. Further, if Jetstar does drop the regional services, Air NZ prices will gradually revert to market-realistic levels for each route, and those in Whanganui who have been going to PMR for the cheap deals will have no reason to do so.

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  2. I'm not sure anyone is going to pay through the roof for 'superior customer service' in an old Navajo over paying to go in a larger turboprop.

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    1. Air Napier says it offers six flights a week, $299 one way, $349 if you sit in the co-pilot's seat (so it must be a single pilot operation), on one route (Napier/Gisborne). I don't think any of that is even faintly relevant to Air NZ and Jetstar services to Auckland.

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    2. I was more responding to them potentially considering doing NR - AA as mentioned in the article

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  3. The moral of the story, don't compete with Air NZ, work around them like Sunair and Soundsair or with them like Air Chathams has done.

    Jetstar regional services could be pulled due to the high cost of operating 5 Q300's and the necessary infrastructure that supports them but it will depend on what Qantas wants to do with NZ regional access. At the moment, it is cheaper for Qantas to co-share with Air NZ 17 regional destination that has 52 turbo prop aircraft for regional operations compared to Jetstar 5.

    It would cheaper for Jetstar to ditch the regions and concentrate of their domestic mainline jet services, as they are an LCC not FSC like Air NZ and Qantas.

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    1. Sounds Air hardly "works around" Air NZ and Jetstar. They take them both head on on the lucrative trans Cook Strait routes.

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    2. Spot on, and you'd argue too BHE-CHC which airnz still promote and offer, just via Wlg.

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    4. Um but its still competition. Doesnt matter how you sugar coat it, Sounds Air is still offering flights across the strait, on the same routings as Air NZ (WLG/NSN/BHE) Doesnt matter if it's a local airline or not, it's still competition, and both airlines will be trying to get as many bums on seats on their own aircraft as they can.

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    5. I wouldn't say directly competing with each other I'd say more complementing each other. Unless sounds buy a Q300 or a ATR and start offering 39 flights... Air NZ arnt worried by them, infact air nz offered commercial sensitive info on Westport and Taupo routes.
      If air nz really wanted to... they could up frequency and drop ticket prices and push sounds out of Nelson and Blenhiem..

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    6. I wouldn't say Sounds "take on" air nz with the cook straight in regards price wars nor do they "try" to undercut air nz etc. More that they just do what they do which is offer an alternative locally run service that can provide more of an personal service than what Air NZ would/could offer and also... They only offer a price where they can still make a profit and also offer a standard last min fare that is usually cheaper than what Air NZ is... for example... 99 for sounds air or 149 air nz from Blenhiem to Wellington flying tomorrow.
      Sounds is basically a local airline with its key operations out of Picton and along the way filled a niche under air nz with Nelson and Blenheim be it pickings from air2theres routes. But they never go head to head nor are they out to undercut the opposition nor go for routes outside of the cook straight that air nz is on.
      Regards BHE-chc
      Of course air nz promotes BHE through Wellington it is their responsibility to offer that option. But I wouldn't say Air NZ are directly competing with sounds

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  4. Since you don't seem to get it, this will be short. If two individual company's, are offering the same product, it is competition. To say SA and NZ are complementing each other is nonsense. I'm sure Air NZ would dearly love to have SA out of the way on services across the Strait. Full monopoly is the goal. Its business 101.

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    1. Soundsair core business is and has been WLG/PCN (Koromiko). Air NZ doesn't operate this route. Air NZ doesn't perceive Soundsair as a commercial threat across Cook Strait. If they did, they would have either bought them or force them out of business.

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    2. "Soundsair core business is and has been WLG/PCN (Koromiko). Air NZ doesn't operate this route"

      But they operate WLG/BHE, and if WLG/PCN didn't exist there would be a hell of a lot more people flying to Blenheim.

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  5. In a nutshell
    Sounds air and Air NZ head to head on the cook straight routes.

    Sounds air
    A small family run airline offer nice slow scenic flight over the sounds. Great for tourists and people who arnt in a great hurry and for locals who want to support a local airline with regular customers, customer service personal and pilots all on first name basis, chatting away to each other like good mates, carrying on with conversations from where they left of on from the last flight and getting to sit in the co-pilots seat. Not in anyway activly undercutting air NZs fares. But they do offer cheaper lead in/same day flights. Connections on offer from BHE or Nelson.... Taupo.... PPQ....

    Air New Zealand.
    Fast and comfort flight on big aircraft and offering many flights a day to Auckland CHC and Wellington kouru lounge, connections throughout the entire network from Blenhiem to Kerikeri to London....

    Air NZ have helped sounds with the behind the scenes Taupo and Westport and one wonders what help air nz gave sounds with BHE-CHC

    Lots of head to head competition there isn't there....

    Be totally different situation if sounds brought a couple of Q300 and a ATR, started offering $49 flights to Auckland with 10 flights a day with an interline agreement with Virgin Korean China southern along with Strata lounge access for paying members then started flying from Wellington to Tauranga, Napier, Rotorua Queenstown, Dunedin... NOW... Then you would see what true competition from Air NZ against Sounds air would look like!!! And it would be a whole different ball game than what you see between the two on the cook straight routes

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  6. Haha just doesnt get it does he :) I also agree that SA and Air NZ are technically in competition. Completely irrelevant the backgrounds and other offerings of said operators, they both operate flights, on two of the same routes - its called competition.

    Will he believe a dictionary definition? - 'rivalry between two or more persons or groups for an object desired in common, usually resulting in a victor and a loser but not necessarily involving the destruction of the latter.'

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    1. fras444 Sounds Air undercuts Air NZ on the BHE route as you yourself noted. Their peak time flights are within minutes of Air NZ flights. They are taking passengers from Air NZ. That is competition.
      Yes Air NZ helped Sounds Air with Wesport and Taupo (and before that WLG-WAG). They have also helped Air Chats and Barrier by providing as little information as they could get away with on the routes those airlines took over. Why? Because it was politically expedient to do so. They were getting stick from their majority owner over the dropped routes. Ideally in business 101 they would not have. Westport hurts Hokitika, Taupo hurts Rotorua and similar for the Air Chats and Barrier routes. The majority Government ownership of Air NZ is a significant impediment and reality to them implementing full business 101 on their domestic operations.

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  7. fras444 is correct in this comment. Air NZ doesn't perceive Soundsair as a commercial threat across Cook Strait despite they might operate a cheaper fare or departure close to an NZ flight. If they did, they would have either bought them or force them out of business. The other factor, Soundsair is

    Christopher Luxon has said in the media on a number occasions, that Air NZ will work with smaller NZ based regional airlines.

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    1. "Christopher Luxon has said in the media on a number occasions, that Air NZ will work with smaller NZ based regional airlines"

      Completely political.

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  8. Yes but you both fail to realise, while not a commercial 'threat', it is still competition. Take PCN out of it. They are still operating flights to BHE and NSN with people who would if not for SA be sitting on a Air Nz plane paying a Air NZ fare!

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  9. Even the ferry would be considered competetion.

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  10. Soundsair introduced $59 fares. They said that was to respond to competition from Air NZ. Competition works both ways. isn't that the end of the matter?

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    1. It'll be the end of sounds air if they keep offering $59 fares!

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