Key: Air NZ needs to look at airfares

FOCUSED ON AIRFARES: John Key talks at the Romeo Bragato wine conference in Blenheim today.
FOCUSED ON AIRFARES: John Key talks at the Romeo Bragato wine conference in Blenheim today.

Air New Zealand needs to keep working to reduce regional airfares, Prime Minister John Key says.

The airline said today it would review the cost of last-minute domestic regional airfares after criticism that they were too high.

Key said in Blenheim today he had directly raised the issue of high regional airfares with the airline's chief executive, Christopher Luxon.

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"I've made it clear that I think Air New Zealand needs to continue the work it's doing while making sure that it reduces prices to the regions if it can. Because in the end we always know they're likely to have a more monopoly-type position in those areas. They've got to make sure that they continue to deliver fair pricing to the regions.

"Now, they assure me they are. But they also assure me they're very focused on that area."

The airline announced today annual profits had soared by 45 per cent due to higher passenger numbers and greater capacity.

Key said it was doing a "magnificent job" and was one of the few airlines in the world to make a profit.

However, the high price of airfares to regional areas had been raised with him as he travelled around New Zealand, and he had "directly raised" that with Air NZ.

The airline's pricing schedules were "quite complex", he said.

It was up to Air NZ's leadership to run their company, he said.

"I was simply making the point that they're our national carrier and we expect them to deliver fair prices across New Zealand . . . New Zealand is a small country and in so many areas, we either have a monopoly supplier or a duopoly position."

Regional airfares were in the spotlight earlier this week after a Nelson woman and her husband paid a total of $1352 for last-minute return tickets from Nelson to Dunedin for a funeral. The fares worked out at $340 per person each way.

Luxon said today last-minute airfares could come under review.

"A strong performance like this certainly helps the business be able to keep a downward pressure on airfares," he said.

In the last six years average regional fares had not changed, he said.

Luxon said he believed Air New Zealand had the best regional network in the world.

Normalised earnings before taxation of $332 million for the 2014 financial year were up 30 per cent on the previous year. Statutory earnings before taxation were $357 million, an increase of 40 per cent, while statutory net profit after taxation was $262 million.

Operating revenue, capacity and yields grew across the network, while unit costs remained stable.

Chairman Tony Carter said that the result represented the third consecutive year of strong earnings growth for the airline.

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