Island Aviation has formally complained to the Commerce Commission accusing Barrier Air of aggressive price dumping designed to starve out its only competitor and secure a monopoly on flights to Great Barrier Island.
The complaint alleges Barrier Air is intentionally absorbing financial losses through severe undercutting, employing a strategy specifically designed to rip the margin out of the market and kill off competition entirely.
Barrier Air strongly denies the allegations, arguing the discounted fares are standard seasonal promotions and accusing Island Aviation of trying to force island locals to pay higher prices.
The alleged market strangulation is focused heavily on the North Shore route.
Island Aviation CEO Chris Sattler alleges Barrier Air is heavily discounting flights specifically on his airline’s strongest routes and busiest travel days.
Sattler noted that while Barrier Air operates approximately 25 flights a week from Auckland Airport, the cheap deals are only available on a small fraction of those services.
“But they’re offering $98 flights on flights until the end of July out of North Shore. And that is clearly not a cost covering,” Sattler said.
The timing of these discounted flights specifically targets Island Aviation’s most profitable travel days.
“Unfortunately, the 2 days that they’re flying is the Friday and the Sunday, which are normally the busiest days and the days where you make your money,” Sattler said.
Since the launch of the $98 fares, Island Aviation reports that its North Shore sales have dropped by roughly 50 percent.
The pricing war comes at a highly difficult time for small regional carriers, who are facing intense financial pressure from surging jet fuel prices driven by ongoing geopolitical conflict in the Strait of Hormuz.
Sattler warned that if Island Aviation is forced to stop servicing the North Shore, Barrier Air would be in a position to return pricing to much higher levels without any market competition.
“I understand people need cheaper tickets, everyone is under pressure. It’s totally understood,” Sattler said.
“But just please, if you can consider the longer term impact, because if this is done just to create monopolies, we all pay for it in the end.”
He further alleged that Great Barrier Island residents are effectively subsidising Barrier Air’s other regional routes where the airline faces more competition.
Sattler pointed to the Kerikeri route, which is double the distance of the Barrier flight but significantly cheaper per kilometre.
“On Kerikeri, you’re paying a $1.09 per kilometre that you fly out of Auckland. And to the Barrier, you’re paying $3.22 a kilometre,” Sattler said.
“So the Barrier people are subsidising Kerikeri, and the routes where they have competition. And that’s just basically that’s just shocking.”
This is the second time Sattler has approached the Commission regarding these tactics, citing a previous incident where a former pilot was allegedly threatened with aggressive pricing strategies.
“Grant said to him, if you go to another airline that flies to the Barrier, I will drop the rate so low that they will go out of business,” Sattler alleged.
Barrier Air CEO Grant Bacon rejected the claim that the pricing strategy was targeted or malicious.
“Barrier Air always offers our customers seasonal off pricing and special pricing for the locals of Great Barrier Island,” Bacon said.
“I find it crazy that our competitor is trying to take this away from the local market and force everyone to pay higher fares.”
Bacon also disputed the claim that the deep discounts were isolated to the North Shore flights.
“The idea that we do it only out of North Shore airport is also inaccurate. We have 100s of fares for $98 out of Auckland airport to Great Barrier Island for May/June/July. Plus our locals return vouchers,” he said.
Bacon countered the claim regarding the Kerikeri route, stating that winter flights to Great Barrier Island run at a significant financial loss.
“The kaitaia and whitianga routes subsidise the great barrier route for 9 months of the year when we are not covering our costs of operating to the Barrier,” Bacon said.
He added that the cheaper Kerikeri prices were introductory launch fares designed to help the airline survive the winter period.
“If you look at Kaitaia fares they are significantly higher than great barrier which is where Kerikeri fares are heading also,” Bacon said.
Bacon vehemently denied the alleged conversation with the former pilot took place.
“I have never made any statement such as that to a Fly My Sky pilot and I actually can’t think of anyone who has flown for both fly my sky and island aviation,” Bacon said.
Bacon dismissed the suggestion that his airline was attempting to secure a monopoly, noting that Island Aviation has operated for nearly five years without interference.
“We haven’t done anything to hurt them and our everyday fares are often more expensive than theirs,” Bacon said.
“We welcome competition and I have never felt that having an entire market is a good thing.”
Bacon pointed to the previous Commerce Commission decision as evidence that their pricing strategies are legitimate.
“Chris Sattler has already been to the commerce commission to try and get us to raise our locals fares and the Commerce Commission saw no issue with it,” Bacon said.
The Commerce Commission took no further action on that 2022 complaint.
The Commission concluded it was unlikely Barrier Air breached the Commerce Act at the time, noting it was unclear if the airline held a substantial degree of market power or if its pricing fell below cost.
Bacon confirmed that Barrier Air has not yet received any formal notification from the Commerce Commission regarding the most recent complaint.
“It has been well publicised in the Media that all airlines are facing significant challenges since covid and Barrier Air is the same. We appreciate the support of all our customers who are getting us through this really challenging time,” Bacon said.
The current allegations of anti-competitive behaviour follow a 2018 investigation by the Civil Aviation Authority that found a former Deputy Chairman of the CAA board used confidential information to give Barrier Air a commercial advantage over a competitor.
In September 2017, Peter Griffiths attended a CAA board meeting where he learned the acting director was planning to suspend Tauranga-based operator Sunair Aviation due to safety concerns.
Griffiths then contacted the management team at Barrier Air, an operator he had recently taken part-ownership of.
The CAA investigation found Griffiths suggested Barrier Air contact Sunair to offer help in meeting any outstanding contractual obligations resulting from the suspension.
Sunair learned of its suspension from this contact with Barrier Air rather than the official CAA notice, which was sent later.
Griffiths resigned in 2017 upon realising the leaked information was confidential, apologising and stating his intention was only to minimise passenger disruption.
CAA Board Chairman Nigel Gould called the actions a profound error of judgement.
Source: Barrier News
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| Source: Barrier News |
