Fares flying too high?

21:35, Aug 30 2014
Palmerston North Airport
FARE DEAL: More passengers would allow larger planes to use Palmerston North Airport, lowering the cost of flights.

Filling up bigger planes is the best hope for regional airports wanting to eke cheaper fares out of Air New Zealand, says Palmerston North Airport chief executive David Lanham.

Prime Minister John Key added his voice this week to calls from around New Zealand for lower regional airfares, with expectations fuelled by the airline's recently posted 45 per cent profit increase.

Lanham said the reality was that flying small aircraft for small markets was a great deal more expensive than filling larger aircraft on main routes.

The 19-seater Beech 1900D aircraft used on many of the regional routes, such as the Palmerston North to Nelson link, were an example of aircraft that were the right size for the market, but with relatively expensive seat prices.

Air New Zealand was changing the Nelson services to less frequent, larger Q300 flights next year.

"The extra seat capacity, and relatively lower increased costs, is an obvious outcome," Lanham said.


Palmerston North Airport was continuing to work with Tauranga to build a case to encourage Air New Zealand to provide a new link between the two cities, he said.

"It's still a big priority for us, but we need to wait until they are a bit more sure how far they can stretch the Q300 fleet."

Lanham said the most likely way to reduce regional air fares was to increase passenger numbers.

"Then there is more chance we can increase services or relax fares.

"The more volume we have, the lower the average revenue they need to extract per customer."

Mayor Jono Naylor said he would be delighted to see lower airfares in and out of the city.

"But Air New Zealand's profits don't necessarily come from the regional routes, and I'm sure they would be asking why their profits on other routes should be subsidising regional travel."

Naylor said Palmerston North and the airport company needed to continue working with Air New Zealand to ensure flights in and out of the city were profitable and affordable.

"Hopefully they will see there are some opportunities to cut us some slack."

Destination Manawatu chief executive Lance Bickford said he hoped Air New Zealand's commercial success would improve the region's bargaining position in advocating for better deals.

But he did not think the airline should be criticised for its success while people wanted cheaper travel options.

"It's too easy to throw mud.

"Very few countries in the world have a network quite like that provided by Air New Zealand.

"It's a little simplistic to just compare routes and planes and fares without looking at the cost structures involved in maintaining some of our secondary routes.

"They would probably be more profitable without regional routes."

Bickford said cheaper air travel would be an absolute benefit to the region, encouraging more people to visit, and enabling more people to travel away.

The New Zealand Airports Association said regions were right to question whether provincial routes were generating excessive profits.

Association chief executive Kevin Ward said the situation could be resolved by the Commerce Commission introducing an information disclosure regime for regional airlines with monopolies on routes.

However, Aviation NZ, the industry body representing the aviation sector in NZ, said more regulation was not the answer.

Chief executive Samantha Sharif said it was a reality that where there were fewer passengers in the regions, the prices would tend to be higher.

Manawatu Standard