06 June 2016

Air Wars

A thought provoking opinion piece from New Plymouth...

OPINION: Ah, competition. It's a wonderful thing, especially when it comes to flying. That's the view of at least two groups in Taranaki at the moment, since Oz cheapie airline Jetstar began its flights between here and Auckland. One is the hitherto untapped air travel market comprising perhaps thousands of people who traditionally travelled to the big smoke by car, preferring Mt Messenger and the Awakino Gorge to Air New Zealand's expensive monopoly. The other includes business-people with a stake in Jetstar's potential to increase the number of visitors here - hoteliers, caterers, tourism operators and those who run attractions like the Len Lye Centre. And New Plymouth District Council, for a related reason: its airport investment. Jetstar's announcement it would come here had a big impact on the council, which half-owns the airport with the government. Having only just approved plans for an $11 million upgrade, it suddenly had to adjust those to accommodate a second major airline. That added a million dollars to the cost, along with another $400,000 spent on a temporary terminal, extra carparks and moving fuel pumps to expand tarmac space. Bearing in mind the last two items were planned anyway, the newcomer has cost the airport well over $1 million. At this stage, ratepayers don't have to fork out anything directly, because the airport company will borrow the money and repay it through charges to the airlines, based on passenger traffic. It's covered even if overall passenger numbers (up about 13 per cent in the first month) drop after the initial boost, since they can review the airline fees every year. All well and good. Or is it? Consider this: annual passenger traffic totals about 350,000, with such rapid growth over the past decade that 550,000 is expected within seven years. However, even with Jetstar's modest addition of 40 flights a week to Air NZ's nearly 200, the total number of seats currently available over a year amounts to about 800,000 (assuming 68-seater ATRs on Air NZ and 50-seater Bombardier Q300s), which is well over twice the current passenger traffic. If those numbers are right, it means an average loading of less than 50 per cent per flight. Is that sustainable? Neither company will part with that sort of information, but it seems like something's gotta give. It's given already in some centres: neighbouring Whanganui has just lost its Air NZ connections to Auckland because the airline isn't filling its 50-seater planes (bigger isn't always better). What happens if Jetstar takes too big a bite out of Air NZ's business here? At the start of the year, the latter's 195 flights in and out each week continued to provide direct services throughout the day to the main centres and other key cities. Air NZ was also responding to Jetstar's cheap deals, offering some that were just as good, depending on when you booked (that applies to Jetstar, as well). If Air NZ passenger loadings start to drop - something that seemed bound to happen even without Jetstar, given the current downturn in the dairying and oil/gas industries - logic suggests one or more things must happen. One might be a reduction in the number of flights, meaning fewer options for those who will stick to Air NZ simply because, in the opinion of large organisations, it offers a reliable service that gets their people to out-of-town meetings on time. Another might be to move some flights back to the Q300s it used prior to the ATRs (and which Jetstar uses now). Ironically, there might be an unexpected benefit in that, because according to frequent flier Bryce Barnett, the Q300s feel a lot more stable when Taranaki is suffering one of its customary south-easterly blows. Another possibility, of course, is that after a trial period the Jetstar venture could go the way of past competitors to Air NZ on many provincial routes like ours - they might just pull out altogether. Then we're left with a new airport that will be future-proofed beyond foreseeable requirements, plus a temporary terminal. The council is confident it could find someone else to rent that, but who knows. The worst upshot would be a return to higher air fares because of the loss of opposition. So what do we do? Well, keep using Jetstar, obviously, but not so much that we force Air NZ to cut too many of the options we have taken for granted for so long. Or we could go back to driving north on the soon-to-be improved road.


  1. The Australians came in with a black mail tactic playing 7 airports off against each other causing public pressure for councils to offer great sweeteners to the foreign owned airline. 5 airports were selected. No council wanted to be the airline that said no to the airline sent from God - Jetstar.

    It would be very interesting to compare what Air NZ is paying these regional locations in all aspects compared to the overseas competition.

    This article speaks many truths. Competition in small challenging markets can have negative effects as well as some positive.
    Potentially short term gain provoking long term pain.
    WAG has been the first casualty due to proximity to PMR with unsustainable competition there.

  2. I agree with most points contained in the article.

    It is becoming a clear that Air NZ is using ATR's on routes that are operated by Jetstar plus stream lining regional destinations to suit ATR operations by having one aircraft type for regional services similar to one aircraft type of domestic jet services and to say to other 1st level operator/s, if you want to takes us on, you will need to match in what we got.

    By using ATR's on these routes are essentially to offer more seats, newer equipment with slightly better comfort levels and with better all weather capability than what Jetstar can offer.

    By having a better aircraft, Air NZ can match any fare offer that Jetstar will offer on regional services, as Air NZ has the seat capacity and reduced operasting costs to do it.

    The question is, can Jetstar maintain services at cheap fares using a 50 seater Q300 against a 68 seater ATR?

    Like the developing market of 2nd/3rd level air operators opening of new routes that has been traditionally NAC/Air NZ, it is going to be interesting in see how all this going develop, to see if Jetstar (or Qantas) has the will to continue to develop their New Zealand regional network and how how deep is Jetstar (or Qantas) financial pocket/s are?

    1. "with better all weather capability than what Jetstar can offer."

      Please explain Kris. The Q300 cruises faster, flies at the same altitude, can handle a greater crosswind component, and can land in shorter runways than the ATR.

  3. Definitely a interesting piece. And brings up some valid points. It will be interesting to see how things go with Jetstar. I had heard talk that they are struggling on their AKL-PMR services. Air New Zealand seem to be running all ATRs to Palmey from Auckland now. Whanganui is the sad reality of this increased competition. After the regional shakeup that saw Eagle Airways wound down, Whanganui ended up with one of the better schedules, Taupo, Hokitika and Timaru ending up with pretty poor schedules. As a frequent flyer, the Air New Zealand before the shakeup, was ideal for a flyer like myself. Several daily flights, to small centres, in small planes. It was brilliant, but clearly uneconomic for the airline. Gone are the days of flights to places like Oamaru and Wanaka. For the business man, getting around New Zealand was never easier. Price was a major factor, often being very high to these smaller centres, often out of reach of the average leisure traveler. So while it is super unfortunate I can no longer fly to these smaller centres, the Airline has had to move with the times. I feel with the winding down of Eagle, this has given Air New Zealand more finances to tackle Jetstar. Just a thought anyways

    I have no qualms flying with the likes of Sounds Air, and Air Chathams to get where I need to go. It is just unfortunate I cannot access the Koru Lounges, and if things go wrong with delayed flights, I have nothing to fall back on. Learnt very quick to have a good travel insurer.

    Air New Zealand pulling out of Whanganui could be a good thing. Under Air Nelson, the city was never going to get a fantastic schedule like it was under Eagle. Air Chathams have proven the doubters wrong when it came to Whakatane, and have even increased their flight offering from when they first started. The airline has marketed Whakatane as a destination, offering DC3 packages with inclusive accommodation and White Island tours. They have painted CIC up in a flying billboard livery, displaying all that is awesome about the Eastern Bay. Whanganui has the potential to have same thing happen.

    I have flown with Air Chats several times to both the Islands and Whakatane, and they are great. Friendly staff, great service, and reliable. The Metroliner is cramped, but obviously a good aircraft for Air Chathams to be operating...

  4. The ATR crosswind limit is 38kts vs the Q300's 36kts (both on a dry runway), the cruise TAS is within a few knots of one another and would be dependant on how the operator of the Q300 sets power for the cruise, the ATR is fully automatic.

    Before long the 72-600's will be RNP-AR capable and I suspect Air NZ will pressure the CAA and Airways to build more AR approaches at regional airports. Which will give them a distinct advantage in poor weather and also fuel savings which will pay off when the price starts heading north again.

    1. Yes, that is the aim to have all of the ATR72-600's fully RNP-AR capable, hence the replacement of ATR72-200's.

      Can't see Jetstar/Qantas upgrading their Q300 fleet for all weather flying but they could surprise us yet.

    2. The ATR is 35knts vs the Q300 at 36knts, dry. But dry is not the issue. The ATR has a significant reduction in crosswind limit for a wet runway, the Q300 has no such reduction.

  5. "All that glitters is not gold"