Opinion: An illicit market has emerged for on-selling plane tickets, but instead of suffocating the idea, the airlines should be running it themselves, writes Wellington student Jack Close.
My time as a student away from home at the University of Otago can be summarised simply: $500 return flights. Motivated by the “beauty of the price system”, I found myself looking for alternatives to airfare-induced financial ruin, and my search led me to a fascinating but shady online marketplace. A black market.
I’m coming clean. I’m a member of an online student group, with more than 8,000 members, that is dedicated to avoiding some of the eye-watering prices for air tickets in New Zealand through the informal auction of second-hand flights.
The process is simple: someone lists their unwanted flight and someone else buys it. It may not be strictly legal. It is certainly in breach of conditions. You fly under the name of someone else. You usually pay for it via bank transfer. You are completely open to risk. But it is substantially cheaper.
Last week I flew down to Dunedin at the “so-cheap-it-can’t-be-legal” price of $50 return: the product of one of these underground exchanges. At relatively short notice you’d usually expect to pay $500 return, and now I’m paying $50? $450 that the airline didn’t get their hands on? Poor shareholders.
In fairness to the carriers, non-transferable ticket policy (ie no name changes) stems from a reasonable concern. They would probably emphasise security issues but it is primarily, surely, about revenue. Without non-transferable tickets, repugnant scalpers would be able to buy blocks of the cheapest tickets and on-sell them at a profit.
Making money off transferable tickets is good for the airline
Air New Zealand and Jetstar should instead be offering a service to on-sell tickets. The reality is that people buy flights that they sometimes don’t need, and now that there’s an apparently growing market in which to sell them, the airlines may be losing out on a lot of money.
A human at an airport stares out the window, thinking about pricing models. Photo: istock
Air New Zealand’s statement of financial performance for the year to 30 June 2015 reports $4.1 billion in “passenger revenue”. The national carrier, one of the world’s most innovative airlines, has the opportunity to sell seats more than once without any change in operating expenditure. If a seat is sold twice then the labour, maintenance and fuel are already accounted for on the first purchase. Even if only 1% of passengers on Air New Zealand flights decided to on-sell their tickets at cost price, this still means that roughly $41 million in “passenger revenue” is passing them by each year.
How might they get in on this market without incentivising scalpers to buy cheap tickets in blocks and hawk them down the line? Set up exactly the same service the existing black market is offering but regulate it and take a slice of every ticket on-sold – a 20% commission, say. Let Air NZ customers sell their tickets and offer the buyers a fully transferable ticket in their actual name.
If I could get through a boarding gate without the anxiety of pretending to be someone else, I would be happy to pay a premium.
The gains in passenger revenue might not be as mouth-watering as $41 million for free, but recapturing money that rightfully belongs to New Zealand’s golden child airline is sure to sell.
It’s also good for the customer
On-selling of tickets isn’t a bad thing. It increases overall customer satisfaction with more people flying to where they want to go and fewer people on the verge of panic attacks while attempting to reappropriate their gender in boarding queues. (Yes, people buy tickets in the names of opposite sex. It’s cheap.)
Legitimising and regulating such a process will bring scores of sceptical middle-aged customers to the fore. As it stands, the clandestine market is for the most part occupied by thrill-seeking students: a formal system would invite mainstream flyers to increase their consumer surplus.
Airfare prices are not efficient. If Air New Zealand regulated an on-selling service, it could capture the willingness of more customers to pay money. Not only is this more efficient, but it also makes the airline money while acknowledging the atrociously low incomes of cold Otago students.
So maybe I’m paying $60 for return flights to Dunedin instead of $50, but I still prefer that over $500. And why should Air New Zealand care? They’re getting an extra $10. Everyone wins.
On the final day of the Tripartite Economic Summit, Tim Murphy discovers how a talk fest can get real-world results – and gets a lesson in American-style positive thinking.
The United States Ambassador to New Zealand, His Excellency Mark Gilbert, has a three word family motto: “Never Don’t Go”.
It means get into everything; accept every challenge; look for the possibilities.
He obviously followed it, as the former White Sox baseballer is way down here on the edge of the earth at the behest of President Obama, a sweaty friend who features on his Twitter profile photo (@ambmarkgilbert).
@ambmarkgilbert
At Auckland’s big summit with Los Angeles and Guangzhou cities yesterday Gilbert expanded on the family philosophy: “You never know when you will meet someone or have something that will change your life.”
He was congratulating the hundreds of delegates from the three countries on meeting – and giving them a heads-up that the speaker he was introducing, his countrywoman Sunny Bates, could be a life changer for them. “Today could be one of those days.”
Bates, a networking force of nature who sits on the TED (talks) Brains trust with names like Gates, Page, Brin and others, liked the “Never Don’t Go” motto – but she thought her myriad involvements were mainly due to FOMO (fear of missing out). “I spend my whole life in that place”.
More on Sunny later. If you ever get a chance to hear her talk – and she’s in Christchurch and Queenstown in coming days – Never Don’t Go.
US Ambassador Mark Gilbert (photo: ATEED/Brendon O’Hagan)
The Tripartite Summit, which ended yesterday on something of a high, was a challenge for us converts to the Never Don’t Go mantra. But each time you forced yourself, Gilbert-like, you came across something that proved him right.
Word emerged at one stage that the Vice Mayor of Guangzhou, Wang Dong, and his pedestrian motorcade, and Auckland Mayor Len Brown were moving out of the Viaduct Events Centre to unveil a plaque. Something dies inside journalists at the thought of a plaque unveiling. But off we went.
Through the construction zone that is Wynyard Quarter, following for a time a Chinese delegate who self-mockingly held his arm in the air, to the surprising offices of GridAKL set up by Auckland Council. If you’ve never heard of it, you wouldn’t be alone.
Here, one of the tangible gains of all this summiteering revealed itself. We were in a funky gathering-place for 52 Auckland start-up businesses in the old Lysaght Building, to see monster Guangzhou business InnoHub cement its presence within Auckland’s tech and creative community.
The backstory to this is fascinating. One of InnoHub’s founders, Hongbo Xu, was a student in Auckland. He then worked for a Telecom company where he encountered the now chief executive of Auckland Tourism Events and Economic Development, Brett O’Riley. Hongbo went on to work in the US, and back to Guangzhou where he founded InnoHub, now the home to 2000 Chinese start-up businesses.
The two execs found each other again and in Guangzhou, and then in Los Angeles just six months ago, a memorandum of understanding to bring InnoHub to Auckland was signed, with a commitment to invest $20m here. This week, InnoHub showed Vice Mayor Mr Wang the work of its representative here and unveiled its plaque, and the Chinese state newswire Xinhua networked the story around the world.
“Two of the major cities of China and New Zealand on Monday launched a project to drive high-tech start-up collaborations between the two countries,” it began, adding the investment would help support Chinese-New Zealand start-up companies in the IT sector.
It is one small example of what this conference and its predecessor in LA can achieve. The organisers are acutely aware that too often international talkfests remain just that. Len Brown told the conference plainly it was, at its essence, about “jobs, jobs, jobs’.
On InnoHub, Brown simple says: “It is a bloody good example. Because [the plaque unveiling] is done at a political level there’s a very clear commitment long-term.”
Seeking to live up to the Never Don’t Go approach, I went to another place most people would avoid: the Business Activation Lounge. It did help when someone called it the Speed Dating Lounge.
Here, hosted by the Bank of New Zealand, people from the three countries met at one of 10 numbered tables, helped by translators and advisors, to see what could be made to happen beyond the two days of the summit.
By late yesterday, 300 speed dates had occurred. Serious intent had emerged from at least half. Like Inno-Hub and GridAKL, marriage might be a long way off, but courting has begun.
Drone entrepreneur Derrick Xiong
Down the corridor from the daters and in a room overlooking the Waitemata, Guangzhou innovator Derrick Xiong was finding people beside him on the podium attractive, in a strictly business sense.
His session would in normal times rival a plaque signing. Its title was “Advanced Manufacturing and Automation”. It was, on the face of it about nanofibre production, advance composite materials, polymer chemists and textiles.
Scores of delegates followed Gilbert’s urging and fronted. Xiong was fascinating. He and his partner started a consumer drone company with four staff two years ago. They now have 300 staff, a private valuation of $US400million and are developing what he calls a “flying car”. His company Ehang, aims to “help shape the way people connect with the sky”. Its 184 autonomous aerial vehicle can fly a passenger 30 kms, or for 23 minutes.
Xiong made a connection yesterday with both fellow speakers: Iain Hosie of Auckland’s Revolution Fibres, who might offer an answer to lighter materials for his drones’ eight rotor propellers. And Professor Simon Bickerton, a big brain who heads the University of Auckland’s Centre for Advanced Materials, and is at the cutting edge of what’s used to build planes, trains, automobiles and boats.
The 27 year-old Xiong, freshly speed-dated, is already talking about his company having a presence here, the flying car being used across the Cook Strait. “Even if something bad happens, it is not going to impact anyone on the ground,” he says cheerily. “I’d be the first to give it a go.” Never don’t go.
“Self-flying vehicles are actually much better than self-driving cars,” he says, waving at the many impediments on the ground around the Wynyard Quarter and beyond.
Sunny Bates (photo: ATEED/Brendon O’Hagan)
Back along the corridor is Sunny Bates. Her bio describes her as a “connector and conspirer” and her speech was on the power of creative industries and culture in stimulating economic growth. She’s a VITAL person, tanned, upbeat, juggling invitations on the same day next month at the White House, a Boston commitment and an engagement in Arizona about public lands and American Indians.
Her encounters here with the Māori economy, delegates and the language have been stunning. “The awareness for people with the invocation of the land, the language, the heart is remarkable.”
She’s from New York, not L.A, but is at the Tripartite Summit because of a discussion with a New Zealand friend in a hot tub on a boat about “intangibles and I.T.” “I don’t go to a lot of business conferences. I go to ones where I’m lucky to meet unusual bedfellows.”
Cultivating networks is one thing. Living in them is the challenge. She knows. One of her acquaintances is trying to get people to think long-term “like 10,000 years”. “It’s like being back in ancient Greece.”
By many accounts a high point of the summit was the 500-person dinner, attended by Prime Minister John Key. Carol Hirschfeld was master of ceremonies. Len Brown sang, again. A group of Chinese delegates, well-fuelled, sang too on stage – a song called “We Are Friends”. Dancers from all three countries did their thing and three cultures melded very late into the night.
I missed the fine cultural interactions. I had to write for The Spinoff. I’m kicking myself slightly, as what goes on tour shouldn’t always stay on tour. I wish I was a Gilbert.
Some Summit Numbers
$5-$10million The common amount needed by NZ start-ups from venture capital; but it can be too small, according to Aucklander Tony Bishop of GRC Partners, to appeal to overseas investors. “They need a bigger bite.”
$US400m The cost of Guangzhou’s new Super Computer Tianhe 2, the world’s fastest. Professor Yuan Xue-Feng told delegates the computer, bigger than our Viaduct Events Centre main auditorium, would compute in one hour what would take the entire Chinese population 1000 years to process.
80 million The number of followers on Weibo of China’s number one celebrity and answer to Angelina Jolie, Yao Chen.
This report was commissioned in association with Tripartite Summit organisers ATEED (Auckland Tourism, Events, and Economic Development). Home-page photo: @InvestAuckland.
